Pumpkin Patch Analysis Essay Example
Pumpkin Patch Analysis Essay Example

Pumpkin Patch Analysis Essay Example

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  • Pages: 10 (2708 words)
  • Published: November 23, 2017
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Pumpkin Patch has a strong advantage in its extensive history of catalogue and mail-order sales. This allows them to provide detailed information to their customer base across all market channels, including wholesale, retail stores, and Internet sales. In terms of technology, advancements in internet, mobile, and wireless communication have allowed industries to expand their sales and operations globally. This has also led to the outsourcing of product manufacturing to Asian countries like Thailand, China, India, Bangladesh, and Vietnam.

On a global scale, Pumpkin Patch is affected by various factors such as global competition, wars, terrorism, the risk of a global financial crisis, and fluctuations in oil prices that can lead to a global energy crisis.

There are also political and legal issues to consider, particula

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rly within the UK and US markets. These include quotas imposed on Asian manufacturers. When conducting an analysis of the industry environment using Porter's Five Forces, the goal is to understand the dynamics and structure of the children's clothing industry and identify both threats and opportunities for the firm.

The threat of new entrants into the children's clothing retail industry is moderate to high. While it may be difficult for new brands to gain traction in the market due to branding issues, product sourcing is relatively easy at the lower end where brand is not as critical. However, one barrier to entry is product differentiation.

The Pumpkin 1 OF 7 Patch NAS has been successful in the area as teenagers are able to find and choose from a variety of tattoos at the willing kiosks. They consistently source ideas from local and international markets to meet
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consumer preferences. The bargaining power of suppliers in the clothing industry is low as outsourcing production to Asian countries has limited their power. Good relationships with suppliers throughout Asia also work in favor of the company. There are few substitute products in the children wear industry, making competition relatively low. However, there is a moderate-high level of rivalry among competitors in this industry. Differentiation through fashion is crucial in this case.The children's wear industry faces competition from large department stores and discounters like Mark & Spencer and Walmart, as well as specialty clothing retailers with children's sections like GAP. There are also specialty children's clothing stores like Pumpkin Patch. When there are high strategic stakes, competitive rivalry intensifies as market leaders strive to perform well. For example, Pumpkin Patch specializes in selling mainly children's clothing, but faces less pressure to take customers from competitors in a growing market. Rivalry is also reduced when buyers find a differentiated product that meets their needs and develop brand loyalty. Brand recognition and differentiation are essential in this industry to reduce the intensity of rivalry among competitors. The bargaining power of buyers is moderate to high in the children's wear industry. While buyers have limited choices, the degree of differentiation driven by brand influences their options. Nonetheless, buyers always negotiate for higher quality, better service, and lower prices.The bargaining power of buyers is strong when they have the ability to switch to another product with little or no cost, especially in the childlessness industry. Additionally, their power increases when the industry product lacks differentiation.

Therefore, companies in the industry must adjust their product prices accordingly, finding a balance where buyers

are willing to purchase while still earning a satisfactory rate of return on their capital.

Regarding the competitive analysis, the children clothing industry is somewhat attractive, with minimal concern for the bargaining power of suppliers. The intensity of rivalry among competitors is manageable as long as a company can differentiate itself from others.

However, one potential threat to the industry is the bargaining power of buyers. The low switching costs for teenagers to switch products could negatively impact the market. Retaining customers in this industry is crucial for firm survival, and strategies such as integrated differentiation and cost leadership can help mitigate this threat over time.

In terms of the competitive environment, J competes with Pumpkin Patch (UP) based on price and similar fashion. J has even attempted to recruit designers from UP. These factors have financial implications for UP and can affect their innovation capabilities, both of which are significant contributing factors to the firm. It's important to note that J was formerly a supplier to UP.The firm takes measures, such as exclusivity agreements with suppliers, to mitigate the issue of suppliers turning into competitors. In contrast, other strategic groups, such as discount retailers like Wall-mart in the U.S. and The Warehouse in New Zealand, have multiple distribution centers to improve efficiency and flexibility.

However, department stores like Marks & Spencer and GAP in the childlessness industry compete through wholesale market arrangements in the UK. This competition increases awareness of the potential of this segment in the clothing market.

The company has opportunities to enter the wholesale market in the UK through large retailers and establish a distribution center in the Northern Hemisphere to lower distribution costs and

reduce the bargaining power of buyers. However, there are threats such as suppliers becoming competitors by acquiring manufacturing plants and a strong bargaining power of buyers which may lead to a loss in customer base. Additionally, there is intense competition in the industry and the company faces increasingly competitive markets both locally and internationally.

In terms of internal analysis, Pumpkin Patch's resources can be categorized as tangible and intangible. Tangible assets are those that can be seen and quantified.

The text discusses the resources of Pumpkin Patch (UP), which can be categorized into four groups: financial resources, organizational resources, physical resources, and technological resources. UP's financial resources consist of funds raised through an initial public offering of $100 million in 2004, which increased to three times that amount by 2005. They also had operating revenue of approximately $280 million in 2005. Physical resources include assets such as a distribution center located at the head office in Auckland and retail stores acquired mainly in Australia and New Zealand. UP also purchased the HOB clothing chain from Gleason to enhance their Urban Angel brand. The last tangible asset UP possesses is their stock of technology, including trademarks and copyright for their brands, 'Pumpkin Patch' and 'Urban Angel'. There are three types of intangible resources: human resources, innovation resources, and reputation resources. UP's human resources are built around knowledge and organizational routines, emphasizing family values and informality in the workplace to align with the company's brand. Their innovation resource is significant, as they can source fashion ideas internationally and have a team responsible for conceptual artwork, style creation, and quality control.

The team at Pumpkin Patch has a unique ability

to generate ideas and incorporate successful elements from previous designs into their work. Their reputation is built on the recognition of their brand name, 'Pumpkin Patch,' which is synonymous with high quality childlessness products offered at competitive prices in the industry.

Pumpkin Patch's capabilities are defined by their range of skills and resources. Their design department both locally and internationally sources ideas from designers globally, allowing them to create innovative childlessness. They also have the ability to source products overseas at a lower cost without compromising quality, ensuring that the final product aligns with their brand standards.

Moreover, Pumpkin Patch has the capability to stock and distribute their products across all markets and handle different seasonal demands in various regions. Their sales and marketing efforts extend through multiple channels, including retail stores, wholesale segments, internet platforms, and catalogs. Additionally, they possess other notable capabilities such as a dedicated sales team, experienced managers, strong customer support, valued wholesale relationships, and a family-oriented culture.Core Competency Analysis:
- Product Design Ability: Yes, Rare, Valuable, Costly to Imitate, Non-Substitutable
- Production's relationship: Yes, Yes, No, No
- Distribution Center: Yes, Yes, Yes, No
- Sales & Marketing: No, No, No, No
- Sales Staff: Yes, Yes, No, No
- Managerial Experience: Yes, Yes, No, No
- Customer Support: Yes, No, No, No
- Wholesale Relationship: Yes, Yes, No, No
- Family Culture: Yes, Yes, Yes, No

Pumpkin Patch's core competency is arguably its product design ability. Despite their failure to enter the women's wear market, they have the advantage of being able to transfer these abilities across national borders and expand on them without having to invest heavily in other capabilities such as a distribution center. This gives them

a sustainable competitive advantage. Additionally, their family culture can be seen as a competitive parity. They are able to work more effectively as a team in an informal environment and emphasize family values which aligns with their branding.

Value Chain Analysis:
- Firm Infrastructure: Small Capital Expenditure Company compared to international standards. Solid Balance sheet after Initial Public Offering.
- Human Resource Management: Significant ownership of shares by staff (about 6% of shares). Emphasized family values.We offer holiday programs that support family culture and the brand. Cry©chew is an adult organization that takes care of children in place of their parents. Our loyal and long-serving employees in Technology Development (Design) provide leading-edge designs in the childlessness industry locally and internationally. We offer a range of ageless products that are consistent with consumer preferences. Our sales and marketing efforts include internet sales channels, mail orders through catalogues, and retail stores. We provide quality guaranteed after-sales service with a 24/7 large operating call center. Our centralized logistics center in Auckland provides flexibility in distribution, although it can be costly due to varying large distances. We have established sustainable relationships with overseas suppliers for product sourcing and maintain a presence in New Zealand for flexibility. One major weakness of Pumpkin Patch (UP) is their inability to manage growth and leverage their brand without the capacity to support it. They lack a distribution chain in the US or UK, resulting in significantly higher freight costs and capacity problems with air freight in Auckland.However, UP's main focus currently is on saving overhead costs and maintaining stability in a single distribution center rather than considering potential issues that may arise from industry growth. The

company's strengths lie in its core competencies and unique capabilities that are valuable and difficult to replicate. As mentioned before, UP excels in product design, allowing them to stand out from competitors. Additionally, their family culture fosters strong teamwork and an effective work environment. However, this informality can also be a weakness as it may lead to a lack of proper planning and direction. Managing growth is a significant weakness for the company, as they struggle to leverage their brand without the capacity to support expansion. On the other hand, UP has opportunities to explore the wholesale market in the UK and establish an additional distribution center in the northern hemisphere, which would contribute to their growth within the company and the industry. Lastly, the company faces threats such as suppliers turning into competitors, increased bargaining power of buyers, and competition within the industry.Pumpkin Patch has implemented a focused differentiation strategy in the sub-teen customer segment, targeting parents in the middle to high income category. Their success lies in their emphasis on branding and the importance of product quality. They recognize that market signals are crucial in determining whether a design is successful or not.

One aspect that sets Pumpkin Patch apart from competitors is their unique brand and the design of their clothing. They have the ability and resources to create new designs in-house as well as internationally, giving them an edge over rivals. For instance, they directly purchase exclusive clothing and fabric prints from designers in London and Paris.

Although Pumpkin Patch faces challenges like competitors copying their designs, they constantly strive to design new children's clothing before their rivals. This continuous process of innovation

allows them to differentiate themselves from competitors. They understand that lacking design capabilities would leave them with no choice but to imitate others, resulting in delayed releases by approximately 5 months or more.

Furthermore, Pumpkin Patch recognizes the importance of maintaining a fresh store appearance and regularly adding new clothing ranges throughout the season. This approach encourages customers to return for subsequent visits.

Pumpkin Patch utilizes various methods to stand out in the fashionable childlessness industry. At the corporate level strategy, Pumpkin Patch (UP) employs multiple channels of sales including mail orders, retail stores, wholesale, and online website sales. Furthermore, UP, originally from New Zealand, has expanded its presence to other countries such as Australia, UK, and U.S. While their main focus is selling children's apparels, they have also ventured into related segments such as home, maternity, underwear, nightwear, swimwear, accessories, and footwear.

In terms of overall strategies, Pumpkin Patch displays an opportunistic style which has allowed them to grow internationally. However, their growth appears to lack organization and planning in terms of regularity. The company's decision to enter the UK market may have been a mistake by the management team. This is due to the fact that they had minimal brand recognition in the UK prior to launching their product there, resulting in a lack of profitability. Additionally, they had limited resources in the country to establish a brand presence within a more competitive market compared to Australia.

Wholesale has proven to be financially beneficial for the company, providing significant returns and a potential for rapid brand expansion in the United Kingdom. Pursuing a functional-level strategy through a wholesale agreement in the UK seems like

a logical step for UP. Building brand awareness is crucial for success in the retail and clothing industry, making it essential to capitalize on this opportunity to create brand awareness through wholesale in foreign markets, ultimately leading to positive earnings.

The value chain analysis highlights a key issue regarding Pumpkin Patch's stock and distribution capacity to support sustainable growth. The expensive distribution model, particularly with increasing sales in the Northern Hemisphere, may cause difficulties for the only distribution center in Auckland to meet the growing demand. The company's previous year's turnover suggests that their distribution systems are not fully prepared for growth. While the company's share price of $3.0 per share indicates that they can raise funds from the stock market to establish another distribution center in either the UK or US, the available funds would still be relatively small compared to international competitors like GAP and Wall-Mart.Establishing another distribution center in the Northern Hemisphere is a crucial step for Pumpkin Patch to handle the industry's market growth. At the business level, Pumpkin Patch can employ an integrated cost leadership and differentiation strategy to enter these new markets. The company already has a unique branding that differentiates itself from competitors, but it can further improve its business strategy by reducing the cost of stocking and distributing goods (freight costs) to offer products at a more competitive price. This will improve their financial position within the industry and expand their customer base, facilitating growth. Furthermore, awareness of the company is a key determinant for successful retail stores. Pumpkin Patch can leverage its design capabilities in the leading edge kids' fashion industry through wholesale and potentially

internet catalogue sales. Greg Mir, the Executive Chairman, noted that revenue from catalogue direct mail-orders has declined due to new store openings, resulting in fewer online or catalogue orders being placed (Hanson et al 2011).

Although catalogue sales appear to be declining in favor of retail store sales and wholesale complements retail sales, the effectiveness of wholesale market entry for successful retail market entry is a question worth considering. It is important to note that these two market segments cater to different groups of customers.

Despite this difference, increasing the wholesale segment can be seen as a logical move in terms of current profitability and investments made. Thus, Pumpkin Patch needs to prioritize their corporate-level strategy when it comes to choosing channels for marketing their products.

One area that seems to have limited growth and profitability is Urban Angel. The lack of attention given to this segment of the business is particularly disappointing.

Finally, any expansion into the retail markets in the UK and US should be gradual, ensuring that a sufficient scale has been established from the wholesale segment first.

Reference List: Hanson, D., Hit, Michael A., Ireland, R. Duane; Hosking's, Robert E. (2011). Strategic Management: Competitiveness and Globalization (4th ed.). Asia-Pacific, Sydney.

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