Dollar Tree Strategy And Key Performance Indicators
OL 501: Business Foundations
May 7, 2022
American Apparel’s two main tactics to getting out of debt and back on track are to assess existing inventory and operations and realign them with the company’s objective and vision. We observed that, despite an increase in sales, profit had declined. American Apparel reported a net profit of $1,112 in 2009. Despite increasing sales to $633,941 in 2013, American Apparel lost $106,298 in profitability. American Apparel has to make some immediate improvements and concentrate on its most lucrative businesses. When an increase in sales does not convert into an increase in profit, a problem occurs.
A deeper examination of American Apparel’s present inventory system is required, with a focus on the cost of items sold. It may concentrate on the most lucrative items and develop marketing strategies to promote them (Church et al., 2019). American Apparel may renegotiate with existing raw material suppliers to guarantee they obtain the best possible bargain. A cost analysis of all of their locations should be undertaken to determine profit margins, and any locations that are not profitable should be closed.
American Apparel may use a “price line” approach, which is defined as “the practice of selling products exclusively at specified fixed prices that imply definite price declines.” American Garments should employ price lines on new goods to ensure that their pricing meets their purpose of providing high-quality apparel to the consumers (Mehta, 2016). When a product costs more, the customer assumes that the quality must be higher since the price is more. The ability to provide high-quality clothes is consistent with American Apparel’s objective.
American Apparel’s third pricing approach may be to “compare the price of a product at a given level with a greater price.” By assessing their inventory, they may be able to reduce the price of items with a low turnover. Customers are more inclined to spend more money on higher-priced products if exceptional offers and discounts are promoted in the store, therefore this tactic would increase foot traffic to retailers.
American Apparel’s goal and objectives were jeopardized as a consequence of the company’s fast expansion and failure to handle operational, regulatory, and marketing challenges. The mission statement of American Garments is “to manufacture apparel that people like to wear without depending on cheap labor.” During a federal inquiry in 2009, American Apparel was forced to lay off a large section of its workers because they had deviated from their original plan. A CEO under investigation for sexual harassment was the focus of several dangerous and provocative advertisements. During the company’s expansion, they lost sight of the company’s core aim. Now that the CEO has departed, the firm must focus its marketing on the company’s aim of producing high-quality garments without the use of low-cost labor and by doing everything in-house.
All of these departments will have a role in the success of this strategy: marketing, operations, accounting, sales, and HR. In order to ensure that the company’s vision is at the forefront of all business actions, every department must be aligned in purpose. As a result of its controversial CEO and sexually provocative components, American Apparel must come up with a new marketing strategy. They should focus more on attracting families and making sure that customers are fully informed about American Apparel and the message they are sending when they wear their products. In order to satisfy consumer demands, the operations department must operate at peak efficiency. Making sure monthly financial reports are accurate and emphasizing profitability are top priorities for the accounting department. In order to boost profits, salespeople must keep promoting and ensuring that product sales grow. As part of the HR department’s role in retaining staff, it is important to help employees fully understand the purpose and vision of the organization.
The conversion of their stores to solar-powered outlets and an emphasis on recycling can be the focus of American clothing’s green marketing. As American Apparel is a green brand, customers will be able to connect it to the concept of doing good for the environment.
The clothing industry is very volatile because consumers want to buy from a company that adheres to strong corporate ethics and ideals. American Apparel should undertake a marketing campaign emphasizing their commitment to racial and ethnic diversity. They may use the global market to launch a global advertising campaign to show that American Apparel caters to people of different backgrounds, beliefs, and races. This will help American Apparel lose its image as a sexually provocative enterprise by highlighting the company’s international market.
Key performance indicators are measurements that “establish and monitor an organization’s progress toward achieving its goals” (KPIs). Operatory efficiency is an excellent KPI in the operations area since it tells us about an employee’s skill level and productivity. More garments might be produced at lower costs by more efficient workers, resulting in better earnings. This would be beneficial in ensuring that staff are held to a high level of performance. Increased productivity leads to higher earnings (Student’s n.d.). Line Efficiency is a key performance indicator that measures how much it costs to create a certain item of clothing. The cost of creating different garments may assist the organization in developing a price strategy and estimating their profit margin for that item. Repeated order KPIs may also be used to track what’s selling so that the firm can better plan and guarantee that stock is available for what’s being requested on a regular basis. Aside from revenue, inventory turnover is an important KPI to monitor since it may tell us what’s selling and whether or not the organization is overstocking. Furthermore, American Apparel wants to assess the effectiveness of its marketing activities, which they may accomplish by looking at sales data, product expenses, and earnings.
Church, B. K., Jiang, W., Kuang, X., & Vitalis, A. (2019). A dollar for a tree or a tree for a dollar? The behavioral effects of measurement basis on managers’ CSR investment decision. The Accounting Review, 94(5), 117-137. https://meridian.allenpress.com/accounting-review/article-abstract/94/5/117/11753
Mehta, A. (2016). American Apparel: Drowning in debt (HBS No. W1620). Ivey Publishing. Retrieved March 03, 2021 from https://services.hbsp.harvard.edu/lti/links/contentlaunch
Student’s, I. D. FOUNDATIONS OF BUSINESS LAW. https://www.theessayassignmenthelp.com/uploads/1597337319470_Foundations_of_Business_Law.pdf