BA​ ​101​ ​THU​ ​Sandval​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​September​ ​5,​ ​2017

Ang,​ ​Elriche​ ​Jasperr​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Sta.​ ​Rosa,​ ​Danielle​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Uy,​ ​Maynard​ ​Jordan

Chan,​ ​Sabrina​ ​Rae​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Tiu,​ ​Kelsey​ ​Neale​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Tsuchikawa,​ ​Airi
Cheng,​ ​Bryan​ ​Spencer

Case​ ​1:​ ​Armour​ ​Garments​ ​Company

I.​ ​POINT​ ​OF​ ​VIEW

The point of view is of an independent business analyst to Armour Garments Company
(AGC).

II.​ ​PROBLEM
How can the company restore its position as the market leader in the garments industry
despite​ ​the​ ​threat​ ​of​ ​competitors?

III.​ ​AREAS​ ​OF​ ​CONSIDERATION

Lack​ ​of​ ​innovation​ ​and​ ​investment

Despite the fact that T-shirt manufacturing is not complicated, AGC has not been able to
successfully diversify and venture into new product lines. Also, unfavorable market responses
could be attributable to poor planning, execution, and marketing efforts in combination with
inflexible and unimproved machinery not suitable for making other clothing items. The increase
in competitors did not prompt AGC to improve their machinery, look at other possible clothing
lines,​ ​or​ ​lower​ ​their​ ​overall​ ​cost​ ​of​ ​production​ ​because​ ​of​ ​their​ ​still​ ​stable​ ​profits​ ​at​ ​that​ ​time.

Minimal​ ​channels​ ​of​ ​distribution

The company has only focused on distribution to wholesale sellers in Divisoria through
disloyal middlemen and has not expanded its distribution channels to other places like local
department​ ​stores​ ​despite​ ​expanding​ ​markets.

Lack​ ​of​ ​strategic​ ​planning

AGC seems to make major business decisions without doing proper analysis of factors
that might affect the outcome of these decisions such as market trends and economic stability.
Although AGC introduced the new brand, “Blossom,” and produced new product lines such as
polo shirts, there was no market study or business plan made beforehand. There are also no key
performance indicators and no apparent long term goal or plan that the company is seeking to
attain.

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Low​ ​barriers​ ​of​ ​entry
Businesses who wish to compete in the undergarments industry do not need large start-up
capitals since undergarments manufacturing is not complicated and is mainly only composed of
four sections namely cutting, sewing, ironing, and packaging or stocking. Newer companies are
able to make larger quantities with fewer costs due to technological advancements therefore
higher profits which makes the undergarments industry attractive. The threats that the
competition brings as well as other factors that can influence that garments market is
summarized in Porter’s Five Forces Analysis for Armour Garments Company (Table 2,
Appendix).

Rapid​ ​changes​ ​in​ ​fashion​ ​sentiments

The fashion sentiments of people have greatly changed since the inception of AGC in
1954, the company however, was still primarily focused on making just undershirts for men only
that were worn out of habit. The company’s attempt to venture into new clothing lines was only
evident in the more recent years but there has been no specific effort to promote product
differentiation​ ​and​ ​look​ ​at​ ​current​ ​market​ ​needs.

IV.​ ​ASSUMPTIONS

AGC​ ​specializes​ ​in​ ​undershirts

AGC was established in 1954 as a manufacturer of high quality undershirts and has
machinery and equipment that cannot be utilized to manufacture other types of garments. If AGC
ventures into other types of garments, there would be a need to modernize its factory and invest
in more technologically advanced equipment. The strengths, weaknesses, threats, and
opportunities of AGC in relation to its specialization in undershirts is reflected in the SWOT
Analysis​ ​(Table​ ​1,​ ​Appendix).

The​ ​Boston​ ​Consulting​ ​Group​ ​(BCG)​ ​Matrix​ ​can​ ​be​ ​used​ ​to​ ​analyze​ ​AGC
According to the Boston Consulting Group (BCG) Matrix as referenced in the Figure 1 of
the Appendix, AGC was originally a Star because it had a high market share (being a pioneer in
undergarments industry), and it had high market growth. However, as a result of the numerous
entrants to the market, Armour Garments became a Question Mark, now with low market share,
but high market growth. Due to the constant increase in competition and failure to innovate,
Armour​ ​Garments​ ​is​ ​currently​ ​a​ ​dog,​ ​with​ ​low​ ​market​ ​share​ ​and​ ​low​ ​market​ ​growth.

The​ ​company​ ​keeps​ ​its​ ​income​ ​in​ ​retained​ ​earnings/profits

Net income or loss is cumulatively added or subtracted to the company’s retained
earnings account. This means that the company can either get the needed financing for the

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modernization of machinery and equipment from its own earnings, through additional
investments​ ​by​ ​stockholders​ ​or​ ​owners,​ ​or​ ​by​ ​taking​ ​on​ ​loans​ ​from​ ​financial​ ​institutions.

The​ ​company​ ​follows​ ​the​ ​product​ ​life​ ​cycle​ ​model

The company is currently in its decline phase based on the product life cycle model but it
can still extend its maturity and saturation stage once certain measures are taken (as referenced in
Figure​ ​2​ ​of​ ​the​ ​Appendix).

V.​ ​ALTERNATIVE​ ​COURSES​ ​OF​ ​ACTION​ ​AND​ ​EVALUATION

Re-invest​ ​in​ ​the​ ​company

Using the company’s retained profits, they should invest in flexible new equipment to
enhance​ ​the​ ​efficiency​ ​of​ ​production​ ​and​ ​allow​ ​for​ ​the​ ​diversification​ ​of​ ​production.

Align​ ​the​ ​branding​ ​with​ ​the​ ​high​ ​quality​ ​of​ ​its​ ​product
The company is currently in its decline phase based on the product life cycle model as
evidenced by its declining market reach. The company must be able to utilize its branding (i.e.
the brand loyalty of its existing market) to differentiate themselves from competitors who do not
offer direct competition. In this way, AGC will be able to extend its maturity and saturation
stage.

Expand​ ​market​ ​share​ ​by​ ​selling​ ​to​ ​other​ ​customers

Instead of selling solely to Divisoria wholesalers, AGC can also sell to department stores
and other retailers. AGC needs to tap into distributors who are more keen to the goodwill that the
company​ ​carries.

Liquidate​ ​the​ ​company

To minimize losses, management may choose to liquidate the company voluntarily before
it goes into bankruptcy. During liquidation, the assets of the business are sold and the proceeds
and​ ​remaining​ ​cash​ ​of​ ​the​ ​business​ ​are​ ​used​ ​to​ ​pay​ ​the​ ​creditors.

VI.​ ​RECOMMENDATION

The group recommends embracing the company’s reputation for high quality products
and focus its branding to align with what it is already known for. Instead of competing with other
companies, who are not direct threats to AGC (since these competitors offer products of lower
quality and price), AGC should shift its focus to higher quality and higher priced products to
capitalize on its strength as referenced in the SWOT analysis (Appendix, Table 1). Additionally,
this will reduce the threats indicated by the bargaining power of the buyers and suppliers

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Appendix, Table 2) as AGC will be able to reposition themselves through a more thoroughly
defined branding, thereby differentiating themselves from competitors who provide low quality
and​ ​low​ ​priced​ ​undergarments.

AGC should also diversify their sales locations to minimize the threat of the disloyal
Divisoria middlemen. By selling in department stores and not just in Divisoria, AGC will be able
to capture an audience willing to pay a premium for higher quality products, thereby expanding
its market share. The company may also opt to invest in better equipment to extend the
efficiency​ ​and​ ​increase​ ​the​ ​scale​ ​of​ ​production.

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 Appendix

Table​ ​1:​ ​SWOT​ ​Analysis​ ​for​ ​Armor​ ​Garments​ ​Company

SWOT​ ​ANALYSIS

- Product​ ​is​ ​well​ ​known​ ​for​ ​its​ ​superior​ ​quality

STRENGTHS
- AGC​ ​is​ ​one​ ​of​ ​the​ ​pioneers​ ​in​ ​the​ ​undergarments​ ​industry.

- The sewing machines are not flexible and cannot be utilized to

manufacture​ ​other​ ​types​ ​of​ ​garments.
WEAKNESSES - Their​ ​current​ ​market​ ​is​ ​limited​ ​to​ ​just​ ​males.
- They​ ​lack​ ​variety​ ​in​ ​their​ ​products​ ​(only​ ​white​ ​color)
- Limited​ ​distribution​ ​channels

- Undergarments​ ​industry​ ​is​ ​generally​ ​not​ ​complicated.

OPPORTUNITIES - Undershirts​ ​are​ ​worn​ ​as​ ​a​ ​matter​ ​of​ ​habit.
- Business​ ​peaks​ ​twice​ ​a​ ​year​ ​(During​ ​June​ ​and​ ​December)

- Undershirts​ ​are​ ​no​ ​longer​ ​“fashionable”.

- There are little to no barriers to entry (as evidenced by the influx
THREATS
of​ ​competitors)
- Divisoria​ ​middlemen​ ​are​ ​not​ ​loyal​ ​to​ ​brands.

Table​ ​2:​ ​Porter’s​ ​Five​ ​Forces​ ​Analysis​ ​for​ ​Armor​ ​Garments​ ​Company
PORTER’S​ ​FIVE​ ​FORCES​ ​ANALYSIS

The process of manufacturing t-shirts is simple, so anyone

can capitalize on this and produce t-shirts. As such, it can
Threat​ ​of​ ​New​ ​Entrants
be inferred that there are little to no barriers to entry; thus,
potential​ ​competitors​ ​can​ ​easily​ ​enter​ ​the​ ​market.

Since there are numerous substitutes in the undergarments

Threat​ ​of​ ​Substitutes industry, Armour Garments is now pressured to improve
or​ ​innovate​ ​their​ ​products​ ​or​ ​lower​ ​costs.

Bargaining power of suppliers increased because of the

decrease in Armour Garment’s market share, which means
Bargaining​ ​power​ ​of​ ​suppliers
that the suppliers have other customers even if Armour
Garments​ ​were​ ​stop​ ​purchasing​ ​from​ ​them.

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 Bargaining power of buyers increased due to availability
of cheaper alternatives, which means that there is high
Bargaining​ ​of​ ​power​ ​of​ ​buyers
pressure on Armour Garments to innovate their product
line​ ​or​ ​perhaps​ ​lower​ ​their​ ​costs.

Currently, Armour Garments is facing intense competition

despite them having a head start in the market. This is
Overall​ ​rivalry caused by the company’s complacency in their market
position, the low barriers to entry, and the increase in the
number​ ​of​ ​substitutes.

Figure​ ​1:​ ​Boston​ ​Consulting​ ​Group​ ​(BCG)​ ​Matrix

Figure​ ​2:​ ​Product​ ​Life​ ​Cycle​ ​Model