Week 7 - Research Project

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Feb 20, 2024

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Research Project 1 Week 7 Student’s Name: Shriya Agarwal Institutional Affiliation: University of Cumberlands Course: 2023 Summer - Managerial Economics (BADM-535-B03) - Second Bi-term Instructor: Craig Hovey Due Date – 8/20/2023

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study CONTENTS INTRODUCTION ........................................................................................................................................ 2 RESPONSIBLE BRANDS ........................................................................................................................... 3 CHALLENGES FACED BY RESPONSIBLE BRANDS DURING COVID-19 AND IT’S IMPACT .... 4 IMPACT OF COVID-19 ............................................................................................................................... 5 CHALLENGES AND RECOMMENDATIONS FOR THE FUTURE: ................................................... 6 APPENDIX ................................................................................................................................................. 12 REFERENCES ........................................................................................................................................... 14 Page | 2

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study INTRODUCTION The clothing industry has faced unprecedented challenges due to the COVID-19 pandemic. This research paper aims to harness managerial economics concepts from Managerial Economics to develop a comprehensive plan for the clothing business to not only recover but thrive in the post- pandemic era. RESPONSIBLE BRANDS The firm that I have selected for this project is the firm I interned at in 2021 – Responsible Brands. Responsible Brands is a modern consumer brands company with its primary focus in Sustainable Fashion, Mindful Drinks and Plant based protein foods. Its values are centered around Environment, Empowerment, Empathy and Energetic cultures. It operates under Planet First-Profit Next, People First-Publicity Next phenomenon and is proud to bring the most earth friendly lifestyle products to modern consumers. Responsible Brands promotes conscious living with transparency across its business value chain ( https://www.responsiblebrands.net/ ) Responsible brands operates in the fashion and retail industry, specifically within the activewear and athleisure market. It was opened just during August 2018 and just within two years of opening, covid hit. Its aim is to eventually position itself as a premium athleisure brand that offers stylish and comfortable activewear for men and women. For the past ten years, the athleisure clothing market has been one of the fashion industry's fastest expanding sectors. This company, a major participant in the athleisure industry, is known for its inventive designs and its high-quality goods that expertly combine fashion and function. The company had amazing growth before the COVID-19 epidemic because of the emerging trend of Page | 3

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Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study individuals looking for casual and activewear that is both comfortable and fashionable. CHALLENGES FACED BY RESPONSIBLE BRANDS DURING COVID-19 AND IT’S IMPACT 1. Supply Chain Disruptions :  Global supply chains were hampered by the pandemic, which delayed product manufacture, transportation, and delivery.  Like other fashion firms, responsible brands experienced difficulties locating supplies and materials, which could have resulted in shortages and delivery delays. 2. Closure of Physical Stores:  Lockdowns and social distancing efforts forced the closure or restriction of numerous retail establishments, including the physical premises of Responsible brands.  Out of 4 physical locations, 3 major locations operating in California had to be shut down and huge costs were incurred to break the lease.  This influenced the brand's capacity to make money through in-store transactions and consumer relationships. 3. Change in Consumer Behavior:  During the epidemic, consumer spending habits shifted.  Demand for active wear and athleisure increased as more individuals choose to stay at home and prioritize comfort, but tastes for styles and designs may have changed. 4. Economic Uncertainty:  Consumer purchasing power was impacted by economic downturns and job losses. Page | 4

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  Discretionary expenditure on non-essential products like apparel and fashion was reduced during the pandemic. 5. Online Competition:  As more consumers started purchasing online, e-commerce brand competition grew fiercer.  Responsible brands didn’t have an established online presence by then.  The competition for market share between established online competitors and recent arrivals forced Responsible brands to differentiate themselves and modify their digital marketing strategy. 6. Operational Challenges:  Getting used to remote work, putting health and safety precautions in place for crucial employees, and handling logistics for internet orders all presented difficulties. 7. Inventory Challenges:  Closures and shifts in demand left Responsible Brands with unsold inventory, leading to inventory management challenges.  Keeping the proper quantities of inventory is essential to prevent stockouts or surplus inventory due to changing demand and supply chain disruptions. IMPACT OF COVID-19 Due to all the above challenges, responsible brands incurred great losses as it was merely a startup and didn’t have sufficient resources to handle the pandemic. With restrictions on social gatherings, teleworking becoming the norm, and the closure of public gyms and fitness centers, demand for activewear has plummeted. The company is currently facing significant economic difficulties, with declining revenue, increasing inventory, and decreasing cash flow. In addition, supply chain Page | 5

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study disruptions, labor shortages and changing consumer preferences have added to the challenges for businesses. The following recommendations and strategies are suggested to bring the operations back to normal. CHALLENGES AND RECOMMENDATIONS FOR THE FUTURE: 1. Demand Analysis and Pricing Strategy :  Company needs to do do a detailed demand analysis to understand changes in consumer preferences and purchase behavior and based on consumer willingness to pay and perceived value it needs to alter price methods.  To entice customers who are concerned about pricing, it needs to think about providing value bundles or discounts.  It needs to put into practice dynamic pricing solutions that can adapt to shifting market conditions and shifting demand.  Apply demand forecasting techniques to anticipate shifts in clothing styles and patterns. Factor in changes in remote work, virtual events, and hybrid lifestyles to align production and inventory accordingly. 2. Cost-Benefit and Opportunity Cost Analysis  Company needs to evaluate potential strategies using cost-benefit analysis such as evaluat the costs of introducing new product lines, improving online platforms, and investing in sustainable practices. Page | 6

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Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  It needs to determine the opportunity cost of each decision, considering the lost benefits of the alternatives.  Utilize concepts such as net present value and internal rate of return to evaluate digital marketing campaigns, e-commerce platforms, and sustainable initiatives. 3. Elasticity of Demand and Pricing Strategies  Responsible Brands needs to determine the price elasticity of demand for different items of clothing and then use this information to execute dynamic pricing strategies.  During periods of high demand, raise prices slightly to attract consumers' willingness to pay. During periods of low demand, offer discounts to encourage sales. 4 . Strategic Behavior and Game Theory  Apply principles of game theory to predict competitor reactions and guide strategic decisions.  Company can . It can leverage information to gain a competitive advantage. 5. Chain of Supply Management  It needs to work closely with suppliers to maintain a flexible and resilient supply chain.  Inventory optimization strategies can be utilized to strike a balance between stockouts and holding expenses.  To lessen supply chain interruptions, it needs to diversify its sources and create backup plans.  To lessen reliance on foreign production, it needs to consider localized sourcing and strengthen ties with important suppliers. Page | 7

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study 6. Cost control and efficiency:  The company needs to examine cost structures to find areas where costs can be cut without affecting the quality of the final product or the satisfaction of the client.  To remove inefficiencies, it needs to implement cost-effective production methods and think about streamlining operations and electronic transformation.  To improve the online shopping experience and keep a strong online presence, it needs to speed up its digital transformation initiatives. 7. Improve Online Presence  To engage customers online, it needs to make an investment in user-friendly website design, mobile apps, and virtual shopping experiences.  It needs to invest in e-commerce capabilities, user experience, and digital marketing.  The company can utilize interactive content, influencer partnerships, and virtual events to communicate with its audience.  Working together with influencers Partner with celebrities, athletes, or fitness influencers who share the same values as the company. Collaborations with influencers can help the brand become more visible and reach niche consumers. 8. Market Segmentation and Customization:  Based on consumer preferences and behavior after the pandemic, Responsible brands can segment the market.  It can offer special promos and individualized product suggestions to certain consumer categories. Page | 8

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  It needs to develop differentiated strategies for different segments, highlighting unique features and benefits. 9. Advertising and marketing:  To successfully reach target audiences, it needs to optimize its advertising and marketing methods.  It needs to increase brand recognition and sales by utilizing social media channels, influencer collaborations, and targeted online advertising.  It can introduce novel product lines that are in step with shifting consumer needs, such as athleisure wear for working from home or designs that are health conscious.  It needs to develop strong risk management and backup strategies to deal with any potential supply chain, manufacturing, and distribution problems.  It needs to have a crisis management team that can react promptly to unforeseen situations. 10. Customer lifecycle management  Strengthening client involvement through loyalty programs, tailored communications, and top-notch customer service is the goal of customer relationship management.  To increase customer loyalty and happiness, it can collect feedback from customers and modify strategy based on insights. 11. Economic Evaluation of Growth Possibilities  Responsible Brands can analyze prospective chances for growth by forging strategic alliances or venturing into new markets or investigating diversification.  One thing that has worked very well for the company is collaborating with other fitness companies and regularly conduct free classes to attract more customers. Page | 9

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Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  To evaluate the costs, advantages, and potential dangers related to expansion plans, it needs to do a detailed economic study, sensitivity analysis and scenario planning. 12. Financial planning and capital allocation:  Create detailed financial plans that account for revenue projections, cost structures, and cash flow management.  Allocate capital strategically to support growth initiatives, operational needs, and risk mitigation.  Apply lean management and process optimization techniques to streamline processes, cut waste, and boost productivity.  Cost savings and better resource use may result from this. 13. Adapt to Changing Demand:  Continuously monitor consumer preferences and trends. Use data analytics to identify shifts in demand and adjust product offerings accordingly.  . Data-driven decision-making can help the company make more informed strategic choices.  Flexibility in design and inventory can help cater to changing preferences. 14. Emphasize on strengths and unique selling points – Brand Image  Responsible brands already has unique selling points of being environment friendly  It needs to emphasize its Sustainability Initiatives and Externalities business model. This will enhance its brand image and increase customer loyalty. Page | 10

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study 15. Elasticity Analysis –  Conduct a price elasticity analysis to ascertain how responsive customer demand is to changes in price.  This might help the business decide on prices that balance demand and supply. 16. Breakeven point analysis –  The company should calculate the break-even point for various product lines using the break-even analysis.  The business will be better able to allocate resources and understand the minimum level of revenue needed to cover costs as a result. 17. Utilize government assistance :  The company can look into and take advantage of any government grants or assistance programs offered to help small businesses affected by the pandemic. This may offer desperately needed financial relief if needed. 18. Customer Feedback and Adaptation:  Constantly collect and evaluate customer feedback to improve goods, services, and marketing tactics. Responding quickly to customer requests can increase loyalty and draw in new clients. As circumstances evolve, Responsible brands should remain vigilant, adaptable, and responsive to emerging challenges and opportunities. Continuous innovation, customer-centricity, Page | 11

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study and prudent decision-making will be key to navigating the uncertainties and reaching a fully functioning and profitable state in the post-pandemic landscape. By implementing these managerial economics recommendations, Responsible brands can proactively address the challenges posed by COVID-19 and position itself for sustainable growth, profitability, and success in the post-pandemic landscape. APPENDIX  Scarcity and Choice : The fundamental economic problem of scarcity necessitates making choices due to limited resources and unlimited wants.  Opportunity Cost: The value of the next best alternative forgone when a choice is made, crucial in weighing trade-offs.  Marginal Analysis: Decision-makers assess the incremental changes in costs and benefits associated with decisions.  Demand and Supply: The interaction between consumer demand and producer supply determines equilibrium prices and quantities.  Elasticity: Measures the responsiveness of demand or supply to changes in price, income, or other factors.  Production and Cost Analysis: Examining production processes and cost structures to optimize production levels and minimize costs. Page | 12

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Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  Market Structures: Understanding different market structures (perfect competition, monopoly, etc.) and their implications for pricing and output decisions.  Profit Maximization: Short-run profit maximization involves producing where marginal cost equals marginal revenue. In the long run, firms aim for economic profit.  Price Discrimination: Charging different prices to different groups of customers based on their willingness to pay.  Risk and Uncertainty: Decision-making under uncertainty involves evaluating outcomes based on probabilities.  Time Value of Money: Future cash flows are discounted to their present value due to the time value of money.  Cost-Benefit Analysis : Comparing costs and benefits to determine the most beneficial course of action.  Strategic Behavior and Game Theory: Analyzing interactions among competitors to predict strategic decisions and outcomes.  Market Segmentation: Dividing the market into segments based on characteristics to tailor marketing strategies.  Externalities: Costs or benefits imposed on third parties not directly involved in a market transaction.  Public Goods: Goods that are non-excludable and non-rivalrous, leading to challenges in providing them efficiently.  Principal-Agent Problem : Challenges that arise when one party (the principal) delegates decision-making to another (the agent), leading to potential conflicts of interest. Page | 13

Strategies to Thrive a Clothing Business Impacted by COVID-19 – Research Study  Transaction Costs : The costs associated with the process of exchanging goods or services, including information costs and negotiation costs.  Game Theory Applications : Strategies to analyze competitive interactions and predict outcomes in various scenarios.  Regulation and Antitrust Policy : The role of government in regulating markets to promote competition and prevent monopolistic behavior. REFERENCES  Froeb, L. M., McCann, B. T., Shor, & Ward, M. R. (2015). Managerial economics. Cengage Learning  Managerial Economics, 9th Edition William F. Samuelson , Stephen G. Marks , Jay L. Zagorsky  Managerial Economics by Dominick Salvatore  https://www.economist.com/economics-a-to-z  https://www.responsiblebrands.net/ Page | 14

Week 7 - Research Project

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