The North Face
This report is the analysis on The North Face Company (For the overview of the company profile, please see Appendix A). It will take a look at internal as well as external environment for potential market: ski wears. In the internal analysis, the organization’s mission, critical success factor, sustainable advantage competitive will be evaluated together with SWOT analysis. The North Face’s external environment will be evaluated by using macro trend analysis and Porter’s Five Force Model. Last, appropriate strategy for The North Face would be recommended.
The North Face (TNF), Inc. is an outdoor product company specializing in outerwear, fleece, footwear, and equipment such as backpacks, tents, and sleeping bags. As we all believed, a business exists to serve the needs and wants of people, so does The North Face. The company was created to help explorers can easily reach their target by providing quality backpacking, technical mountaineering apparel and equipment.
According to consumers’ interests, they provide the highly functional, highest quality of products in order to achieve and preserve customer loyalty. Different from other competitors, The North Face has their own method of competing which is “Make the best product possible, price it at the level needed to earn a fair return, and guarantee it forever”- summarized by Hap Klopp. A mission needs to be translated into everyday actions, so that, TNF also provide different kind of policies such as return/exchange, warranty, repair .ect policies. The last element in TNF’s mission is the value, which mean the beliefs of people who work in the business. A key concept of principle that The North Face used is “The pyramid of influence”. A strong mission of TNF “Never Stop Exploring” help to provide an outline of how the marketing plan should follow to fulfill the mission, evaluating and screening the marketing plan and incentive to implement the marketing plan.
Critical Success Factors
Critical success factors (CSF) are the elements and organization’s activities that defined as vital for successful targets to be reached and maintained. CSF might include items such as management, production processes, marketing, distribution, employees et… Pyramid of influence model distinguishing North Face from all competitor’s marketing strategy. Moreover, Klopp did not follow the bottom up approach in order to gain sales growth and to meet the demand of the larger segmentation (general campers or secondary users) like other companies. He believed that by using top down approach The North Face would preserve their positions in the customer’s mind as a high quality and durable products. It is also a sustainable competitive advantage for TNF. With top down approach, TNF easily satisfy the high end customers, who are “technocrats”. They could be considered as opinion leadership as their expertise and experiences was often relied on by average consumer when it comes to buying decision process. By influence the technocrats, TNF guarantee their positions in the majority of the customer’s mind.
Sustainable competitive advantages
Strategy is concerned with matching a firm’s resources and capabilities to the opportunities that arise in the external environment.
The North Face identify its resources and evaluate them to identify the key resources which give them the competitive advantage and protect them to maintain the strategic advantage from other competitors. In order to increasing competitive advantage TNF management team need the understanding of the strengths and weaknesses of the workforce then establishing the HR Development function as a strategic partner. Understanding and the way TNF manage to combine resources and capabilities is a key that make them sucessful.
Furthermore, as mentions above, TNF follow a top down approach and it enables TNF to maintain a high position in the customer’s mind. Most of their marketing activities concerned high end consumers because they are most frequent users of the company. And technocrats tend to be opinion leaderships. They would share their experience through word – of – mouth communications and that likely to attract more customers.
To truly value and analyze the future prospects of North Face, we felt it necessary to gain an insight into the company’s strategy, its future plans, its position vis-ï¿½-vis its competitors, and the industry dynamics that affect the long-term performance. We started by performing a SWOT analysis.
North Face’s strengths lie in its brand equity. The company’s products are well known and accepted not only by the individuals looking to climb Mt. Everest, but also by the college age group who sports the company’s jacket and backpacks. North Face Products range from casual apparel to equipment to outerwear to rugged footwear and snow sports gear. These represent main categories under which you will find such items as T-shirts, thermal underwear, anoraks, jackets, parkas, sleeping bags, pullovers, vests, sweatshirts, full body suits, etc. The company’s goal is to offer the most technically advanced products in its industry and to establish the industry standard for quality and performance.
Though it is hard to continuously be profitable selling consumer durables, the company has been able to be successful because it regularly reviews its product lines and actively seeks input from a variety of sources including elite athletes, retailers, consumers and suppliers. The company has an excellent product development team, which includes experts in textiles and design engineering. The company also enhances the reputation of its products by including climbers, explorers, and extreme skiers in its research and development team. With these factors, North Face has been able to sell its product by pushing the status button reaping premium prices for its products.
Unfortunately, the premium brand is the extent of North Face’s success. Its major weakness is with its internal management who has consistently done a poor job managing the company financially. As a result, returns to shareholders have been minimal and the stock price has continued to decline. The poor financial performance of the company has affected its standing in the market and has also affected its ability to take advantage of the different opportunities present in the industry.
Besides, Jack Gilbert, the Sales and Marketing Vice President stated that a North Face retail operation would damage the company’s excellent relationship with its dealers. As the result, the dealers may not give too much their business to the company. Furthermore, entry into expanded retail operations was not a profitable strategy in the short run, (Adapted from TNF case). It is critical for the company to balance the scale of dealers and retails, with the limited financial resources.
North Face’s opportunities are few as the company already carries a diverse line of products. With proper positioning and advertising, the company can maintain and enhance its brand equity, drawing consumers to its stores. Currently, the company only operates three retail stores in California, three in Illinois, and two in Colorado and one in Washington. The main opportunity for North Face is to open more retail stores through the United States as a way of expanding its customer base.
E-Commerce is also another form of outlet that needs to be developed as more consumers are now turning to the net for shopping. However, such expansion in both infrastructure and technology would require significant cash outlays to which the company currently has no access.
Threats for North Face are in the form of the competition. More companies are popping up with similar product line and are very successful at building their own brand equity. Amongst the most important ones are Columbia Sportswear Company, LL Bean, and K2. These companies are well positioned with strong financials, which will enable them to continue building their brand equity and taking advantage of opportunities that come their way as they grow their business.
From the analysis, it is clear that with regards to products and market recognition, North Face is well positioned for success with product line of skiwear. However, management has been extremely ineffective, destroying value for their shareholders. With limited on financial, North Face is currently a “dog” in the market.