TAL Q4

Q4.

How did Porter and Millar (1985) classify the impacts of IT on competition? Discuss the benefits and impacts of the use if IT initiatives to TAL, and how these initiatives have contributed to the strategic repositioning of the company in the apparel value chain.

Porter’s Five Forces Analysis states that there are five important forces which determine the competitive power of a company among the industry competition. Those five forces include the power of buyers, the power of suppliers, the threat of new entrants, the threat of substitute products, and the rivalry among existing competitors.

Nowadays, information technology rapids quickly and becomes a necessity for a company to add value. In fact, information technology can change the five competitive forces in order to enhance the attractiveness of a company.

Information technology can mainly affect competition in three ways, which are changing the industry structure, creating competitive advantages and bringing the whole new business.   

Benefit for TAL using IT:

1. Driving change in industrial structure
   

•       Diminish the threat of new entrant:

Since a large capital investment is needed, it can discourage the new entrants to enter the market. Not only the physical equipments but also the software and technical staff. For example, MTM, it requires a tighter integration with the user’s value chain. Thus, TAL’s VMI and MTM initiatives encourage greatly TAL to contribute the strategic repositioning of the company in the apparel value chain.

•       Try to minimise the bargaining power of buyers:

Since the apparel industry is  buyer- driven, have in-depth information is vital to company to do business.TAL has a capable IT initiative in order to integrate its value chain activities with its customers and can gain retailers’ sales patterns, inventory performance etc. By studying the buyer’s purchasing pattern and making use of IT (eg. VMI), TAL can increase the switching cost of its major buyers and strengthen the relationship between the customers.

•       The bargaining power of suppliers:

TAL invest a lot in their technological innovation for manufacturing and material development. It has fabric expertise to invent or improve the quality of fabric. For example, SofTAL Process and TAL Pucker Free ® Seam Technology, these technology can directly increase the competitive advantage in the market. By make use of new technology, the production process and the product can be value added. As a result, it also may reduce its dependence on fabric suppliers.

2. Creating competitive advantages - Product and service differentiation

Compare with the traditional supply chain between supplier to retailer customers, TAL aims to provide a full package supply solution (Innofacturer) to the retailers through upgrading its product to highly differentiated product offerings.  To maintain the high steady sales in the industry, IT is definitely a strategic tool which TAL keeps introducing new concept such as sharing new styling, pattern and colour, developing innovative products, and having collaborative planning to enrich the information content of its products, and also eliminate warehouse inventory through DTS.  

Additionally, Make-To-Measue (MTM) system between selling and manufacturing also provides a source of differentiation for TAL. MTM is widely use in many different aspects that the products would be adjusted from an existing pattern according to the customer’s measurements or products with a base pattern choose with most closely with the customer’s wants. Since TAL recognises today’s customers increasingly demand unique apparel for their individual needs, TAL also provides MTM to their customers which enable their customers to “design” their unique clothings in order to build consumer loyalty.

3. Spawning new business opportunities

TAL has an advanced information system and works with VMI, it can easily spot out the excess capacity by analysing the production data. The excess capacity can be sold to other companies in order to expand their sales.  

Partnership with J.C. Penny is upgraded. TAL has their own design team to create new shirts and new color to the apparel industry. Under the new partnership, TAL’s design can be sold at 50 J.C.Penny. TAL can use their IT initiatives to add value to their product and access the real time information such as sales data. Demand forecasting, market analysing and purchasing pattern can be done in the information system. Since the fashion industry instantly changes the clothing , the IT initiatives with VMI can respond quickly the demand and the environment change. Once TAL collect the data, it can know the customer’s need and customize the product effectively. The manufacturer can make mass production the customized product.

 

References:

TAL PDF

http://en.wikipedia.org/wiki/Porter_five_forces_analysis