Guess jeans currently holds a challenger position since it had already established the denim market niche ever since its inception with its first pair of jeans ‘the marilyn’, a three pocketed pair of jeans for women(Guess 2009). Other competitors have taken over the market and Guess is merely trying to defend its market position. There is also an ensuing market gap which has been brought about by the entrance of fake products in its traditional markets, a factor which has seen it lose tremendously in its market domain.
Competitor strategies are aimed at acquiring Guess jeans clientele through a well-orchestrated market move. This targets the traditional markets that Guess jeans have depended on for a long time. They may at times initiate drastic price cuts in order to address prevailing changes in a specific market domain (Crow, 2001).
The mode of distribution to be used is determined by a number of factors that include distinctive competitiveness, financial capabilities, brand image, and available facilities (Crow, 2001). It is essentially aimed at product delivered to required destination (Crow, 2001). Intensive distribution on the other hand results in an increase of sales, customer recognition, and increased buying.
Guess jeans can enhance its innovative designs by further developing better prototypes that will enable it relinquish their competitor’s market position. For instance, its expertise in developing unique accessories for men and women wear with regard to fashion forward apparel, handbags, watches, and shoes.
The company is a global brand name and enjoys enhanced licensee relationships. The fact that the company has well-established licensee relationships implies that it is placed strategically market wise. This enables it to distribute its merchandise without the any hindrances presented by government trade regulations.
The prices set for the different product components will follow clear guidelines taking into account the cost of production, profit margins expected, estimated market value, prevailing market situation and consumer socio-economic status (Komminos 2002).
This will determine the rational used since prices will be subject to different factors based on geographic dispositions (Komminos 2002).
Product cannibalization normally occurs when a company replaces its existing product and a better model in its place. This takes little account of position of the company.This is associated with introduction of new technology. It is common with companies which value technology. There are positive and negative with this kind of development.
Adjusting Fixed and Variable Costs for Profit Maximisation
Variable costs do change with change in production level and activity of the business. Variable here refers to change resulting from the different levels of business. On the other hand fixed costs refer to costs that ado not change with the level of production. They are time related and regardless of the level of production (Komminos 2002). Operating costs refer to expenses that are incurred during the normal running of a business equipment or facility. This can further be explained as cost incurred during production of a product or service. These include administrative costs, sales and marketing and research cost. The operating costs can be divided into fixed and variable costs.
Fixed costs (FC) are incurred whether the business is in operation or not. Fixed cost may include salaries of permanent workers and rent for the business premises. Variable costs (VC) on the other hand are costs which increase or decrease depending on the level productivity. Chakravaty explains that increased productivity will lead to increased variable costs. Examples of variable costs include production raw material, labour costs, fuel and electricity (pg 296).
Managers require knowledge on operating cost management in order to increase their revenue. Operating cost management does not only mean reduced production cost. The best approach to effective cost management is to manage cost relative to level of productivity. This means an increase in operating cost resulting in increased productivity is a viable option to effective management.
Calculating operating cost involves addition of expenses incurred during sales and administration expenses. Operating expenses are presented in an income statement usually over a period of time. Most income statements are prepared after one month. Chakravaty further explains that operating costs are necessary for calculating the operating income and operating margin of the business (pg 299). In case of projects it is necessary for the manager to keep an eye on the operating costs relative to the available funds. Guess jeans can benefit by ensuring through management of operating costs which will help the company maximise its profits
Recommendations for Identifying Methods to Reduce Costs
Guess jeans has a variety of options that can be used to reduce the cost of production. The cost of production can be reduced by improving the design while at the same time ensuring that the quality is standard. It is hard to reduce costs through this method after the product has been designed. Machinery used in the production of jeans should be contemporary in all manufacturing branches. Development of designs can be done in collaboration with other members such as Vendors and partners. However, Low bidding should be avoided at all costs because this will tamper with quality and probably damage the integrity of the product.
Guess jeans can also perform lean production whereby the company explores appropriate strategies to improve labour output and reduce wastage. Increasing labour output includes revamping machinery and adopting emerging profitable technologies (Komminos 2002). The company might also consider providing training for its workers in order to familiarize them with these important technologies.
The company should begin by adopting a sustainable business strategy. This strategy should explore avenues that achieve reduced costs and maximise production levels adopting a well research and informed sustainable business strategy will enable (Komminos 2002). Guess jeans should also implement a system evaluation. This System evaluation will ensure that every sector of the production process as well as marketing and sales is performing optimally (Komminos 2002).
The company should also consider reducing its overhead costs. This can be done through simple procedures such as eliminating inventory carrying costs (Komminos 2002). The procurement costs can be reduced through on demand and automatic resupply.
Guess jeans is an apparel and fashion clothing line, which has grown to become an international brand due to its growth potential exhibited. The product is widely popular in United States of America, Europe, and slowly becoming popular in Asian content. The jean is essentially made from denim, which is a legendary type of fabric commonly used in jeans ear. Guess jeans holds recognition from its customers for its sophisticated and stylistic designs, which are constantly undergoing innovations. Through strategic marketing Guess jeans can increase its revenue. This is a basic requirement for products in the fashion industry.