Harvard Case - TOMMY HILFIGER AND CALVIN KLEIN POST-COVID-19: WHAT'S IN STORE?
"TOMMY HILFIGER AND CALVIN KLEIN POST-COVID-19: WHAT'S IN STORE?" Harvard business case study is written by Niccolò Pisani, Ines Augier. It deals with the challenges in the field of Strategy. The case study is 20 page(s) long and it was first published on : Jan 21, 2021
At Fern Fort University, we recommend a multi-pronged strategy for Tommy Hilfiger and Calvin Klein to navigate the post-COVID-19 landscape and achieve sustainable growth. This strategy leverages their existing strengths, addresses emerging trends, and capitalizes on the opportunities presented by the evolving consumer landscape.
2. Background
This case study examines the challenges and opportunities facing Tommy Hilfiger and Calvin Klein, owned by PVH Corp, in the wake of the COVID-19 pandemic. The brands are grappling with shifting consumer preferences, increased competition, and a rapidly evolving retail landscape. The case highlights the need for strategic adjustments to maintain their competitive advantage and achieve long-term success.
The main protagonists are PVH Corp, Tommy Hilfiger, and Calvin Klein, each with its own unique challenges and opportunities.
3. Analysis of the Case Study
3.1. SWOT Analysis
Strengths:
- Strong brand recognition and equity: Both brands possess strong brand recognition and equity, particularly among younger generations.
- Global reach: PVH Corp has a global presence, allowing for expansion into emerging markets.
- Vertical integration: PVH Corp's control over the value chain gives it greater control over quality and cost.
- Digital capabilities: The brands have strong online presence and are actively engaging with consumers through social media and e-commerce.
Weaknesses:
- Dependence on brick-and-mortar retail: The brands remain heavily reliant on traditional retail channels, which have been impacted by the pandemic.
- Price sensitivity: Consumers are increasingly price-sensitive, making it challenging to maintain premium pricing.
- Competition: The brands face intense competition from both established players and emerging brands.
Opportunities:
- Growth in emerging markets: The brands can leverage their global presence to expand into new markets with high growth potential.
- Digital transformation: The pandemic accelerated the shift to online shopping, creating opportunities for the brands to enhance their digital capabilities and reach new customers.
- Sustainable practices: Consumers are increasingly demanding sustainable products and practices, creating an opportunity for the brands to differentiate themselves.
Threats:
- Economic uncertainty: The global economy is facing significant uncertainty, which could impact consumer spending.
- Supply chain disruptions: The pandemic has exposed vulnerabilities in global supply chains, potentially leading to delays and cost increases.
- Changing consumer preferences: Consumer preferences are constantly evolving, requiring the brands to stay agile and adapt to new trends.
3.2. Porter's Five Forces Analysis
- Threat of new entrants: The fashion industry is characterized by low barriers to entry, making it susceptible to new entrants.
- Bargaining power of buyers: Consumers have a high degree of bargaining power due to the availability of online alternatives and price comparison tools.
- Bargaining power of suppliers: The brands have some bargaining power over suppliers, but it is limited by the availability of alternative suppliers and the need for consistent quality.
- Threat of substitute products: The fashion industry is characterized by a wide range of substitute products, making it challenging for the brands to maintain market share.
- Rivalry among existing competitors: The fashion industry is highly competitive, with numerous established brands and emerging players vying for market share.
3.3. Value Chain Analysis
The brands' value chain consists of the following activities:
- Inbound Logistics: Sourcing raw materials and managing supply chains.
- Operations: Manufacturing and production processes.
- Outbound Logistics: Distribution and delivery of products.
- Marketing and Sales: Promoting and selling products to consumers.
- Customer Service: Providing support and assistance to customers.
3.4. Business Model Innovation
The brands need to innovate their business models to adapt to the changing market landscape. This could include:
- Direct-to-consumer (D2C) model: Expanding D2C channels to reduce reliance on traditional retailers and enhance customer engagement.
- Subscription models: Offering subscription services for clothing, accessories, or personalized styling.
- Experiential retail: Creating immersive retail experiences that engage consumers and drive brand loyalty.
- Partnerships with influencers: Collaborating with influencers to reach new audiences and generate buzz.
4. Recommendations
4.1. Digital Transformation:
- Enhance e-commerce platform: Invest in a user-friendly and engaging e-commerce platform that offers personalized experiences, seamless checkout, and efficient delivery.
- Leverage social media: Develop a comprehensive social media strategy that engages consumers, promotes brand values, and drives sales.
- Embrace digital marketing: Utilize targeted digital marketing campaigns to reach specific customer segments and drive traffic to online channels.
- Invest in AI and machine learning: Utilize AI and machine learning to personalize customer experiences, optimize pricing, and improve supply chain efficiency.
4.2. Product Development and Innovation:
- Focus on sustainable practices: Develop sustainable product lines using eco-friendly materials and production processes.
- Embrace personalization: Offer customization options and personalized product recommendations to cater to individual preferences.
- Collaborate with emerging designers: Partner with emerging designers to tap into new trends and attract younger audiences.
- Expand product categories: Explore new product categories, such as home goods, beauty products, or fitness apparel, to diversify revenue streams.
4.3. Market Expansion:
- Target emerging markets: Leverage the brands' global reach to expand into high-growth markets, such as China, India, and Southeast Asia.
- Develop localized marketing campaigns: Adapt marketing strategies to the specific needs and preferences of different markets.
- Explore strategic alliances: Partner with local retailers and distributors to gain access to new markets and build brand awareness.
4.4. Operational Efficiency:
- Optimize supply chains: Streamline supply chains to reduce costs, improve efficiency, and minimize environmental impact.
- Invest in automation: Automate manufacturing processes to increase productivity and reduce labor costs.
- Improve inventory management: Implement advanced inventory management systems to reduce waste and optimize stock levels.
4.5. Brand Management:
- Reinforce brand values: Communicate the brands' core values of inclusivity, sustainability, and innovation to resonate with consumers.
- Engage with consumers: Create interactive experiences and campaigns that encourage consumer engagement and build brand loyalty.
- Develop a strong brand identity: Maintain a consistent brand identity across all channels to ensure brand recognition and differentiation.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations leverage the brands' existing strengths, such as brand recognition, global reach, and digital capabilities, while aligning with their mission to provide high-quality, stylish, and accessible products.
- External customers and internal clients: The recommendations are designed to meet the evolving needs of consumers, particularly younger generations, while also considering the needs of internal stakeholders, such as employees and investors.
- Competitors: The recommendations address the competitive landscape by emphasizing differentiation, innovation, and market expansion.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to improve financial performance by driving sales, increasing efficiency, and expanding into new markets.
6. Conclusion
Tommy Hilfiger and Calvin Klein face significant challenges in the post-COVID-19 world, but they also have significant opportunities for growth. By embracing digital transformation, product innovation, market expansion, and operational efficiency, the brands can navigate the evolving landscape and achieve sustainable success.
7. Discussion
Alternatives:
- Mergers and acquisitions: PVH Corp could consider acquiring or merging with other brands to expand its portfolio and gain access to new markets.
- Licensing agreements: The brands could explore licensing agreements with other companies to expand their product offerings and reach new audiences.
- Focus on niche markets: The brands could focus on specific niche markets, such as sustainable fashion or luxury streetwear, to differentiate themselves from competitors.
Risks and key assumptions:
- Economic uncertainty: The recommendations assume that the global economy will recover and consumer spending will rebound.
- Competition: The recommendations assume that the brands can successfully compete with existing and emerging players in the fashion industry.
- Technological advancements: The recommendations assume that the brands can keep pace with rapid technological advancements in the digital space.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resources required to implement the recommendations.
- Secure necessary funding: Allocate resources to support the digital transformation, product development, and market expansion initiatives.
- Monitor progress and adapt: Continuously monitor progress, assess market trends, and make adjustments to the strategy as needed.
By taking these steps, Tommy Hilfiger and Calvin Klein can position themselves for long-term success in the post-COVID-19 world.
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Case Description
The global fashion industry was among the hardest hit by the COVID-19 pandemic, facing major disruptions on an unprecedented scale. On the retail side, challenges included store closures as part of government lockdown measures, as well as sudden shifts in market demand since many consumers were largely confined to their homes and facing economic uncertainty amid a deepening recession. On the supply side, complex and vulnerable global value chains proved to be ill-prepared for factory closures, prolonged shipping delays and reduced labor capacity due to lockdown measures, as well as sudden order cancellations due to a halt in customer demand. While these supply and demand shocks were triggered by the events of the global pandemic, they came on the back of a laundry-list of sustainability issues for which the fashion industry had since long been widely criticized, such as the environmental impact of textile waste and exploitative labor conditions for workers at the bottom of the value chain. A global leader in apparel, PVH Corp. (hereafter referred to as PVH) - parent company of iconic fashion brands Tommy Hilfiger and Calvin Klein - found itself in the same boat as many players in the fashion industry. PVH suffered significant declines in revenue and earnings, and was forced to make difficult decisions, including permanent store closures as well as substantial lay-offs and furloughs. Stefan Larsson, the president of PVH, who would succeed Emanuel Chirico as CEO in early 2021, had major strategic issues to address, not only to get the company through the COVID-19 crisis but to future-proof it in a challenging post-pandemic world.
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