Harvard Case - American Apparel: Unwrapping Ethics
"American Apparel: Unwrapping Ethics" Harvard business case study is written by June Cotte, Seung Hwan (Mark) Lee, Brittany Schuette. It deals with the challenges in the field of Marketing. The case study is 5 page(s) long and it was first published on : Aug 13, 2012
At Fern Fort University, we recommend that American Apparel (AA) embark on a comprehensive brand transformation strategy focused on ethical sourcing, responsible manufacturing, and inclusive marketing. This strategy should prioritize rebuilding trust with consumers, attracting a broader audience, and achieving sustainable growth.
2. Background
American Apparel, founded in 1989, gained notoriety for its provocative advertising, edgy fashion, and controversial founder, Dov Charney. The brand's success was built on its unique brand positioning, targeting a young, fashion-forward audience with its bold and often sexually suggestive imagery. However, AA's rapid growth was accompanied by allegations of exploitative labor practices, sexual harassment, and unethical business conduct. These issues, coupled with Charney's eventual departure and the company's subsequent bankruptcy, severely tarnished the brand's image.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong Brand Recognition: AA possesses a strong brand name and a distinct visual identity, even after the controversies.
- Unique Product Offering: The brand's focus on basic apparel with a focus on quality and fit continues to resonate with consumers.
- Vertical Integration: AA's control over manufacturing processes allows for flexibility and potential cost savings.
- Digital Marketing Expertise: The brand has a strong online presence and experience with digital marketing strategies.
Weaknesses:
- Damaged Reputation: The negative publicity surrounding its past practices has significantly eroded consumer trust.
- Lack of Ethical Standards: AA's previous disregard for ethical sourcing and labor practices is a major hurdle to overcome.
- Financial Instability: The company's history of financial struggles and bankruptcy has weakened its market position.
- Limited Product Diversification: AA's reliance on a narrow product range limits growth potential.
Opportunities:
- Ethical Consumerism Trend: Consumers are increasingly demanding ethical and sustainable products, creating a potential market for AA to tap into.
- Diversification into New Markets: Expanding into new product categories and geographical markets can broaden the brand's appeal.
- Leveraging Digital Marketing: AA can utilize digital marketing platforms to build a more positive brand image and engage with consumers.
- Partnerships with Ethical Organizations: Collaborating with non-profits and advocacy groups can enhance AA's credibility and demonstrate its commitment to ethical practices.
Threats:
- Competition from Fast Fashion Brands: The highly competitive fast fashion industry poses a significant threat to AA's market share.
- Changing Consumer Preferences: The rise of online shopping and the growing popularity of sustainable brands could further challenge AA's position.
- Economic Downturn: Economic instability can impact consumer spending and negatively affect AA's sales.
- Negative Press and Public Scrutiny: Ongoing scrutiny of AA's business practices could further damage its reputation.
Marketing Analysis:
- Target Market: AA's target market is primarily young adults, particularly those interested in fashion and trends. The brand needs to broaden its appeal to include a wider demographic, including ethically conscious consumers.
- Brand Positioning: AA needs to reposition itself as a brand that values ethical sourcing, responsible manufacturing, and inclusivity. This requires a shift from its previous provocative image to one that emphasizes transparency, sustainability, and positive social impact.
- Marketing Strategy: The brand should adopt an integrated marketing communications strategy that includes:
- Digital Marketing: Utilizing social media, influencer marketing, and targeted advertising to reach a wider audience.
- Content Marketing: Creating engaging content that highlights AA's commitment to ethical practices and its positive impact on the community.
- Public Relations: Engaging in proactive public relations to rebuild trust and communicate its new values.
- Community Engagement: Participating in local events and initiatives to demonstrate its commitment to social responsibility.
4. Recommendations
Ethical Sourcing and Manufacturing: Implement a comprehensive ethical sourcing policy, ensuring fair labor practices, safe working conditions, and environmentally sustainable materials. This involves:
- Auditing and Certification: Partner with reputable third-party organizations to audit its supply chain and obtain certifications like Fair Trade, GOTS, and B Corp.
- Transparency and Disclosure: Publicly disclose its sourcing practices and manufacturing processes to build trust with consumers.
- Employee Empowerment: Create a positive work environment that prioritizes employee well-being and fosters a culture of respect.
Brand Repositioning and Marketing: Develop a new brand identity and marketing strategy that emphasizes ethical values and inclusivity. This involves:
- Brand Storytelling: Create compelling brand stories that highlight AA's commitment to ethical practices and its positive impact on the community.
- Inclusive Marketing: Feature diverse models and representations in its advertising and marketing campaigns.
- Community Engagement: Partner with non-profits and advocacy groups to support social causes and demonstrate its commitment to social responsibility.
Product Development and Innovation: Expand its product range to include more sustainable and ethically produced items. This involves:
- Sustainable Materials: Explore and incorporate sustainable materials like organic cotton, recycled fabrics, and plant-based alternatives.
- Product Innovation: Develop innovative products that meet the needs of ethically conscious consumers, such as eco-friendly packaging and durable, long-lasting garments.
Digital Marketing and Customer Relationship Management: Leverage digital marketing platforms to reach a wider audience and build a strong online community. This involves:
- Social Media Marketing: Create engaging content that highlights its ethical practices and connects with consumers on a personal level.
- Influencer Marketing: Partner with influencers who align with its values and promote its products to their followers.
- Customer Relationship Management (CRM): Implement a CRM system to track customer interactions, personalize marketing messages, and build lasting relationships.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of AA's current situation, including its strengths, weaknesses, opportunities, and threats. They are also aligned with the following key considerations:
- Core Competencies and Consistency with Mission: The recommendations focus on leveraging AA's existing strengths, such as its strong brand recognition and vertical integration, while aligning with its new mission of ethical sourcing and responsible manufacturing.
- External Customers and Internal Clients: The recommendations prioritize building trust with consumers and attracting a broader audience while also creating a positive work environment for employees.
- Competitors: The recommendations address the competitive landscape by emphasizing differentiation through ethical practices and sustainable product development.
- Attractiveness ' Quantitative Measures: The recommendations are expected to lead to increased brand loyalty, customer acquisition, and ultimately, improved financial performance.
6. Conclusion
By embracing ethical sourcing, responsible manufacturing, and inclusive marketing, American Apparel has the potential to regain consumer trust, attract a broader audience, and achieve sustainable growth. This brand transformation requires a commitment to long-term change and a willingness to embrace ethical practices as a core value.
7. Discussion
Alternative options include:
- Continuing with the current strategy: This would involve maintaining the existing business model and hoping for a gradual improvement in the brand's image. However, this approach risks further alienating consumers and failing to address the underlying issues.
- Focusing solely on digital marketing: This could involve investing heavily in online advertising and social media campaigns to reach a wider audience. However, this approach may not be sufficient to rebuild trust and address the ethical concerns surrounding the brand.
Risks and Key Assumptions:
- Consumer acceptance: There is a risk that consumers may not be receptive to AA's brand transformation, particularly those who remain skeptical of its past practices.
- Cost of implementation: Implementing ethical sourcing and manufacturing practices can be costly and time-consuming.
- Competition: The fast fashion industry is highly competitive, and AA may face challenges from rivals who are also embracing ethical practices.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resources required to implement the recommendations.
- Communicate the brand transformation strategy to stakeholders: This includes employees, investors, and consumers.
- Monitor progress and make adjustments as needed: Regularly track key performance indicators (KPIs) to assess the effectiveness of the strategy and make adjustments as needed.
By taking these steps, American Apparel can successfully navigate its challenges and emerge as a brand that is both profitable and socially responsible.
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Case Description
American Apparel, a popular clothing manufacturer, has socially progressive labour policies and uses significant environmental advances in its manufacturing process. In addition, it has a well-established philanthropic arm. Set against these socially responsible policies is the highly sexualized nature of the company's advertising. This element of the marketing mix seems, at least to some consumers, very much at odds with the other aims and policies of the company. The question facing students is whether this disconnect can be maintained or whether the brand's advertising should change.
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