“Boda Skins” in South Africa, Essay Example

Executive Summary

The purpose of this report is to explore and analyse the chosen company Boda Skins in order to develop and assess our research and analytical skills.

Through secondary research we are going to evaluate whether Boda Skins should enter the South African market. We will do this based on online materials with a strong reliability.

In this report we are going to identify and analyse the key factors affecting Boda Skins at national and international level. The factors should be drawn from macro-economic and Yip’s drivers of globalisation.  In addition we are going to construct an analysis of the competitive structure of the industry using 5-forces and identify the structural drivers for change and undertake a stakeholder mapping exercise and draw conclusions on how to manage key stakeholders. We will then evaluate the organizational structure and culture of Boda Skins and identify the generic strategy employed. Based on the above analysis that we will research, we are going to identify what changes the organisation needs to make over the next 5 years and generate relevant recommendations to achieve this.

Boda Skins is a middle-high end leather company producing mainly jackets. Founded by Nathan Alexander, the company has managed to mix British design with Turkish craftsmanship to create the finished products. They use the finest materials from Turkey and advertise the perfect union of style and luxury. All products are then designed in Manchester to create a British good.

Boda Skins should take into consideration the employability of SA. Annually employment increased by 83,000 (1,0%) between September 2013 and September 2014. However, SA’s unemployment results highlight that in 2014, as many as 1,5 million of the 5,1 million unemployed people were looking for a job for more than 5 years. (‘South Africa Unemployment Rate | 2000-2015 | Data | Chart | Calendar’. N.p., 2015. Web. 28 Apr. 2015.) If the number of unemployed people increase then it can potentially affect Boda Skins as less customers will be able to afford to buy their product as well as if the number of employed people increase that would be beneficial for Boda Skins as people are more likely to afford it.

It’s important to mention the Exchange Rates as it affects the consumers buying Boda Skins products online as well as is affects Boda Skins when importing the manufactured products from Turkey. The current conversion rate from ZAR (South African rand) to TRY (Turkish Lira) is 0.21273, while the current conversion rate from ZAR (South African rand) to GBP (British Pound) is 0.0557706. (‘Convert South African Rand To Turkish Lira | ZAR To TRY Currency Converter’. N.p., 2015. Web. 28 Apr. 2015.)

This factor will help assess consumer needs as well as the things, which compel them to make a purchase. There are 11 official languages in South Africa therefore it’s essential that Boda Skins take this into consideration when setting up their website. Also the current population is 46,923,000 however it’s increasing therefore there is a potential for more sales. (‘South Africa Country And Culture | Aupaircare Au Pairs’. N.p., 2015. Web. 28 Apr. 2015.)

There are way more tourists coming to SA nowadays which will bring in more money for the country. However major trading partners of SA is the U.S., Japan, Germany, China, India, Saudi Arabia which means that people are more likely to order cloths from those countries rather than from England because it might be cheaper for them because of partner’s relations.

Boda Skins should ensure that they translate their website into foreign languages. This maximizes sales due to attracting a wider audience. Also 84% of adults own a mobile phone with Internet access when only 18% of adults own a computer, which means that Boda Skins should set up an app for their company for people in SA to have an easier access to their products. The number of Internet users increase from 2,4 million in 2000 to 12.3 million in 2012.

South Africa is a member of the World Trade Organization (WTO), the Southern African Development Community, and the Southern African Customs Union (SACU). South Africa has preferential trade agreements with the European Union (EU)

If your order is to be delivered outside the European Union you may have to pay import duty and local sales taxes, which can affect Boda Skins as, the tax rate can be really high. Duty rates in South Africa vary from 0% to 45%, with an average duty rate of 18.74%. (‘Import Duty & Taxes When Importing Into South Africa – Dutycalculator Help Center’. N.p., 2015. Web. 28 Apr. 2015.)

Using only leathers and furs imported under strict general licensing laws, Boda refuses to trade in endangered species. All goods are purchased in compliance with ethical and humane farming regulations certified by the United States Fish & Wildlife Services (USFWS).

Yip’s Framework

Looking at Yip’s Drivers of globalization we can say that Boda Skins is a multinational company, which has an opportunity in South Africa. From Market Globalization Driver side we can definitely say that is has a potential in SA as middle class growing in this developing county, which may attract new customers and by that Boda Skins can benefit from economies of scale by producing more and becoming more multinational company.

From government Globalization Drivers we can see that Exchange rates may affect SA customers as it can be to high and can be avoided which can be a barrier for Boda Skins. From the Cost Globalization Drivers perspective Boda Skins already benefits as it manufactures its products in Turkey, which is already quite low in cost. However Competitive Globalization Drivers directly affect Boda Skins, as there are many substitute opportunities with lower cost products, which can affect their Boda Skins’s number of consumers.

The 5 Forces That Shape Competition

Threat of New Entrants

The threat of entrants to the industry is for the desire and capacity to advance in the market share placing pressure on costs, prices, and the investment rates that are necessary for competition. The industry in South Africa is faced with immense threat of entrants because of the industry’s attractiveness.

Bargaining Power of Suppliers

Supplier power is high when the industry requirements such as labor, raw materials, and components of production are scarce. High supplier power can result in exertion of influence on the costs of raw materials that result in increased costs to the consumer. The influence on bargaining power of suppliers within the South African market is as a result of; the improved financial markets, improved infrastructure and airports, labor rigidity, brain drain, and domestic logistics. These factors therefore present a situation of decreased supplier power since producers acquire finances easily and the improved airports reflect the ease of importation of the production necessities.

Threat of Substitute Products

The threat of product substitute arises due to the high differentiation ability of the commodities. Therefore, the threat of substitute goods within the industry is immense and influenced by; film, art, and fashion industries, reducing costs of technology, resistance to cooperation among the existing producers, and increased penetration of technology.

Bargaining Power of Buyers

The increased rate of globalization leads to increased opening of markets and equally creation of new retailers from which buyers can choose. The increasing number of buyers switching suppliers within an industry is a reflection of effectiveness in competition. The bargaining power of consumers within the textile industry is affected by; the high income disparity, large informal sector, increased branding activities, favorable AGOA and EU trade, and high quality standards. Therefore, the industry experiences high bargaining power of consumers.

Existing rivalry amongst competitors

The rivalry among competitors within the industry is high as a result of both local and international competition. This immense state of rivalry is propelled by factors such as; minimal corruption, experience within existing businesses, and improving technology. The countries that lead in exports include; China, Taiwan USA, India, and EU27.

Conclusion

Boda skins require comprehending the kind of competitive atmosphere in which it operates so as to ensure its success in attaining its set objectives. Adequate information and full understanding of the environment is important for any company to gain competitive advantage over its competitors. An analysis of Porter’s five forces brings into perspective the dynamics of the industry and essential in increasing profitability and edging competition. Therefore, Boda Skins are able to leverage on the presented opportunities despite higher bargaining power of buyers.

Stakeholder Mapping Exercise

The first step in stakeholder mapping is to identify the stakeholders. Boda Skins has many stakeholders that need to be taken into account including the leather suppliers, jacket designers, Turkish manufacturers, the press, models and celebrities, prospective customers, employees, Public Relations team in California, Administration team in Manchester and any shareholders.  Stakeholder mapping focuses on figuring out your stakeholders and then deciding on the best way to communicate the benefits of your project and ideas.

The most important stakeholders who have high power and need to be kept happy by Boda Skins are the manufacturers, designers, suppliers, and administration. It’s important to keep these people happy because they are the ones who actually produce the products that are being sold. Without them there would be no one to produce the jackets for the customers. Therefore, these people are in a high power position making it important to communicate with them and keep them satisfied.

The stakeholders that have high power and need to be managed closely are prospective customers, employees, and celebrities and models. It’s important to keep the prospective customers happy so that they buy a jacket and recommend it to their friends. It’s important to manage prospective customers the whole time they are deciding on the purchase and after they have received their jacket. Customer relations set companies apart from each other and it is the customer who decides which company does it the best. It is always important to keep employees happy and manage them closely since they are the face of the company. Models and celebrities also have high power and need to be closely managed because they represent the brand and it is important to make sure that it is being represented correctly.

The groups that have low power but still need to be monitored are the press and the Public Relations team. The press can give the brand a bad review and hurt their image. The Public Relations team monitors what is being said about Boda Skins so it is important to monitor their progress. Boda Skins can put in a small amount of effort to make sure that the press and the Public Relations team are making sure that the brand is being represented correctly.

The final group is the shareholders who have low power but still need to be kept informed. It is important to send out any information that the shareholders might be interested in and to keep them informed of big decisions. But the shareholders do not need to be monitored every day and do not play a large role in the operations of Boda Skins.

Organisational Structure of Boda Skins

One relevant variable that really influences employer’s behavior and, in consequence, the performance of business, is the way organisation is structured. Organizational structure can be defined as ‘the formal division of work and the formal configuration of relationships that coordinate and control organizational activities’ (Bratton, Sawchuk, Forshaw, Callinan, & Corbet, 2010). It is important to look after what happens inside the organisation because is a good way to measure employer’s achievement, solve any problems, revert inefficiencies, manage internal issues and deliver the maximum value from the workforce to the customers  (Brooks, 2006).

The types of hierarchy or types of structures that organisations can adopt can be: the simple structure, the functional structure, the divisional structure, the holding company structure, and the matrix structure. In this form, given to its limited range of related products delivered and its size, Boda Skins structure could be categorised as a functional one. The functional structure is centralised and introduces managers who head areas such as production, purchasing, marketing, operations, human resource, research and development and so on (see figure 1). In this type of structure, the board of directors must make sure that all the departments are achieving successfully the aims of the company and fulfilling their functions.

Culture Structure of Boda Skins

As a result of the internal structure, the nature of the organisation and the type of people employed, organisational culture can arise. Nowadays, it is recognized that organization culture is one of the key factors that contributes to the success of the teamwork within an organization (Brooks, 2006). The notion of social structure is related to the ‘relationship between different entities or groups or as enduring and relatively stable patterns of relationship’ (Buchanan & Huczynski, 2004). Boda Skins Company gives a respectful environment for employers and provides them a safe workspace for them, allowing them to express their ideas and flourish their creativity to design quality products. Boda Skins knows the importance of taking into account culture inside organizations. The company knows that employers share time and activities together, and if the perspectives, the beliefs, the values and the way people behave differs, it becomes important to find the better mechanisms to ensure a good coexistence between them.

Generic Strategy Employed by Boda Skins

According to the model designed by Michael Porter, there are three approaches that a business can take to achieve competitive advantages in the market: cost leadership, differentiation and focus (divided into cost focus and differentiation focus) (see figure 2). Porter also highlighted that it is necessary to choose just one of this sources of competitive advantages, otherwise the company could waste resources. Boda Skins organisation is a company that differentiates its products to increase its sales. Its jackets are designed and produced taking into account fashion and quality. The company has a philosophy of luxury and represents beauty and style, which satisfies not price-sensitive people needs  (Boda Skins).

Conclusion

Based on the analysis above, the organization needs to adopt a strong organizational culture as the success of the organization lies within an effective teamwork. Another model which will help the organization over the 5 years is to focus on gaining a competitive edge over its competitors. As the organization has already adopted the generic strategy of ‘Diversification’, it will help the organization in the long run by tackling the competition. Boda Skins have to make the stakeholders happy if it want to achieve success in the long run. It has to maintain good and strong relationship with the suppliers, designers, manufacturers and administration as these are the people who supplies the products that the company produces. The company needs to enhance its value chain by integrating its core functions effectively. According to the analysis of Porter five forces regarding the effectiveness of this industry, it is visible that this industry requires innovation and diversification to be profitable and edging the competition. So, over the 5 years framework, Boda Skins need to continue its generic strategy of diversification and produce innovative products to capture the market. In short, the organization needs to focus on its strengths to combat the threats and look for further opportunities to expand both domestically and internationally.

References

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