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 | | | |

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [1] AO1: Corporate culture – the beliefs and behaviours that determine how a company's employees and management interact with each other and the outside world.
2. [1] AO1: Often implied, not necessarily explicit, and can develop slowly over time from the personalities of the people that the business employs and/or the owners.
3. [1] AO1: Culture is a way of describing the character/personality of the business.
4. [1] AO1: Often referred to as 'the way things are done'.
5. [1] AO1: Types of corporate culture, such as 'Power Culture', 'Role Culture', 'Task Culture' and 'Person Culture' (Handy); clan culture, adhocracy culture, market culture and hierarchy culture (Quinn and Cameron). Accept any valid types of corporate culture.
6. [1] AO1: Corporate culture can be influenced by long-term aims, national cultures and traditions, economic trends, international trade, company size, and products/services, etc.
7. [1] AO1: Corporate culture can come from; company-wide value systems, management strategies, employee communications and relations, work environment and attitude.
8. [1] AO1: It can also include the way the business has been set up and managed, the skills of its leaders (Managers, Supervisors, Directors, CEO, etc.), as well as visual symbols such as logos and trademarks.
9. [1] AO1: Corporate culture can also include; cross-culture refers to people from different backgrounds interacting in the business environment, culture shock which refers to the confusion or anxiety people experience when conducting business in an environment other than their own and reverse culture shock which is often experienced by people who spend lengthy time abroad for business for business and have difficulty readjusting upon their return.
10. [1] AO2: FL operates online with every employee home working – may have an effect on group consultation/decision-making.
11. [1] AO2: Jane's aim was to create an intrapreneurial, dynamic, low-cost clothing retailer – data may reflect this and suggests elements of laissez-faire leadership.
12. [1] AO2: Employees from other software businesses – need to be aligned with FL's culture, may have caused a culture clash.
13. [1] AO2: Marketing Manager came from a supermarket – very different type of business/culture.
14. [1] AO2: Finance Manager has no experience – this may be an advantage as he could be indoctrinated into FL's culture, or it may prove a disadvantage.
15. [1] AO2: FL's digital promotion needed to be aligned with FL's corporate culture – did this have an effect on FL as a whole.
16. [1] AO2: FL named one of the top 10 most innovative businesses in 2016 – link to Jane's aims.
17. [1] AO2: By taking over GY in 2021, FL now has on-site manufacturing employees – rumour of unethical working practices.
18. [1] AO2: Increasing competition in the market – different pressures on FL.
19. [1] AO3: Intrapreneurial culture allowed FL to develop an innovative product in a competitive marketplace.
20. [1] AO3: FL is operating in a dynamic market which requires innovation and creativity, this can be developed in a business culture.
21. [1] AO3: Home working culture allowed FL to lower its costs and achieve Jane's aim and increase profit margin.
22. [1] AO3: Culture formed the basis for FL to become an innovative business – promotion – growth in sales.
23. [1] AO3: FL's culture will have been important in the successful takeover of GY – increases scale of FL – sales – profit.
24. [1] AO3: Culture clash between unethical working practices in GY and FL's innovative, intrapreneurial culture.
25. [1] AO3: FL's culture gives a basis for future strategy decisions and can improve the motivation of the employees – particularly important with employees who are working from home as it gives them direction and manages expectations.
26. [1] AO4: Corporate culture is likely to have played a part in FL's success because of the nature of the business and market.
27. [1] AO4: Corporate culture was an important aspect of Jane's aim to create an intrapreneurial, dynamic, low-cost clothing retailer. FL's success may have led from this aim.
28. [1] AO4: The extent of the impact is likely to depend on whether FL can align GY's culture with their own.
29. [1] AO4: The extent of the impact may also depend on the new product Jane is launching – if it is in a similar market then the culture is likely to continue to be an important impact on FL's decision making.
30. [1] AO4: Overall, the impact of corporate culture on FL's decision making is likely to have contributed to the success of FL and the continued success of the business in the future. However, other aspects are also likely to be important, such as the integration of GY, HRM, marketing and the ability of FL to maintain its financial commitments.