Fashion Letter (FL) Jane Irfan used to be a senior manager for a high-street clothing retailer, but her role was made redundant in 2014. She set up FL in 2015 as an online clothing retailer. Her aim was to create an intrapreneurial, dynamic, low-cost clothing retailer. Jane decided on the following mission statement for FL. 'To empower customers by empowering employees within our dynamic corporate culture.' FL's customers access the business through an app and they pay a subscription fee to FL each month. The app links to all the main social media services. Based on each customer's profile and online activity, one item of clothing is chosen each month by FL's artificial intelligence (AI) system. The item of clothing is then sent, by post, to the customer. Timeline of FL 2015 FL set up as a private limited company with $5m of equity provided by a venture capitalist. Jane hires the employees (see Appendix 1). All FL employees use home working. 2016 FL launches the app. $2 m is spent on digital promotion. An international media organisation names FL one of the top 10 most innovative businesses. 2017–2020 FL pursues a strategy of rapid growth (see Appendix 2). 2021 FL uses external finance to takeover GY, a failing clothing manufacturer (see Appendix 3). 2022 FL is criticised in media reports which claim the business uses unethical working practices in the factories it acquired from the takeover of GY. Jane responds by launching an internal audit of FL (see Appendix 4). Developing a strategy to launch a new product FL's board of directors think that the business is too narrowly focused. It has asked Jane to develop a strategy of diversification. Jane believes it is time for FL to challenge its existing strategies. Jane has recruited a new Director of Strategy who has experience of using a blue ocean strategy approach. [Appendix 1: FL's employees in 2015] • Six software developers with experience of working for global software businesses, such as Google. • A Marketing Director who previously worked for a large national supermarket chain. • A Finance Director who has limited experience but graduated from a top university. [Appendix 2: FL's rapid growth between 2017 and 2020] | | 2017 | 2020 | |:-------------------------------------------|:-----|:-----| | Subscription fee revenue | $2 m | $200 m | | Profit margin | -2% | 3% | | Number of employees | 12 | 240 | | Market share (online fashion market) | 0.2% | 4% | | Number of direct competitors offering a subscription service | 0 | 5 | [Appendix 3: Extract from a 2021 newspaper article about FL's takeover of GY] GY has been a clothing manufacturer for over 80 years, supplying many well-known high street clothing retailers. GY owns a number of factories based in low-cost countries. However, the rise of online retailers that require a fast turnaround of designs and low profit margins has put pressure on GY. FL, one of the success stories of the last few years, has made a takeover bid for GY. FL will significantly increase its gearing by taking over GY, but the opportunity to manufacture its own products may give FL a competitive advantage. [Appendix 4: Extract from FL's internal audit in 2022] | Strengths | Weaknesses | Opportunities | Threats | |:--------------------------------|:--------------------------------------------------|:----------------------------------------------------------|:-----------------------------------------------------| | • Intrapreneurial leadership team | • High gearing ratio | • To sell FL manufactured products through other retailers | • Established retailers are entering the fashion subscription market | | • Well-known brand name in online fashion market | • Weak management control of HR strategy in factories | • To offer different subscription products | • Bad publicity about its factories | | • Low-cost manufacturing | | | |