1.

Introduction

1.1 Purpose

The purpose of this report is to analyze the business strategy of the largest women’s
apparel manufacturer Liz Claiborne and to find out whether the strategy will continue to
remain effective

1.2 Scope

While analyzing the company’s current strategies it is important to consider its goals,
strategies, administration and strategy implementation techniques.

1.3 Method

The information used in this report was collected from the case study sheet provided by
the course Teacher, browsing official website of the company and other related sites.

1.4 Limitation

The main limitation is details of company strategy are difficult to find out in the web-
sites.

1.5 Background

Like the world of digital communications, fashion industry is an environment of

continuous and unpredictable change. Fashions come and go. Trends develop and then
quickly disappear. Changing fashions exhibit all the characteristics of a complex dynamic
system. Change is erratic and unpredictable. While recognizing the tradition of Liz
Claiborne, the changing industry dynamics must be considered.

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2.1 Company Overview

Liz Claiborne, Inc. is one of America's leading apparel companies. Its products are sold
in department stores and specialty stores worldwide. The company designs and markets
fashion apparel and accessories for women; fashion apparel and furnishings for men; and
fragrances for men and women. According to the company's annual report, "Each
division of the company responds to a different set of lifestyle needs or preferences
among the millions of fashion consumers who are our customers." In addition to its
divisions, the company's brand name has been licensed to manufacturers and marketers of
women's shoes, bed and bath furnishings, optics, sunglasses, and men's suits.

2.2 History

In 1981 Liz Claiborne, Inc. became a publicly traded company on the New York Stock
Exchange under the symbol LIZ. With revenues of approximately $800 million in 1986,
the company appeared on the Fortune 500 list of the top companies in America.

In 1994 Paul Charron became the chief executive officer of Liz Claiborne, Inc. In the
same year, sales fell and profits dropped dramatically. Charron, a former navy officer,
was quoted by Nancy Rotenier in Forbes as saying: "The navy taught me how to operate
in a combat zone." Rotenier agreed, saying that "Liz Claiborne, Inc. was practically a
combat zone when the naval-officer-turned-marketing executive was brought in from VF
Corp. to run it in 1994." Extensive market research indicated that many of Liz Claiborne's
fashions had not kept up with current trends, so new styles were introduced, and new
products, such as watches and swimwear, were offered. An extensive advertising
campaign was launched using supermodel Niki Taylor, which helped the company
become one of the largest fashion apparel advertisers. The company used print sources as
well as outdoor billboards and bus shelters to advertise its products.

The apparel industry was not growing. The company had to do everything it could to
increase its competitiveness in order to gain as large a market share as possible. Charron
worked to cut costs using newly introduced information-management technologies.

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Computer-aided design cut costs and reduced the amount of time it took to go from the
design phase to actual products for sale.

2.3 Fast Facts: About Liz Claiborne, Inc.

Ownership: Liz Claiborne, Inc. is a publicly owned company traded on the New York
Stock Exchange.

Ticker symbol: LIZ

Employees: 7,500

Principal Subsidiary Companies: Liz Claiborne, Inc.'s principal subsidiaries are L.C.
Special Markets, Inc.; Claiborne Ltd.; Liz Claiborne Accessories, Inc.; and Liz Claiborne
Cosmetics, Inc.

Chief Competitors: As a manufacturer of women's clothing, Liz Claiborne competes

with: Jones Apparel Group, Inc.; Rafaella; Tommy Hilfiger Corp.; Nautica Enterprises,
Inc.; Ralph Lauren; Banana Republic; Gap Inc.; and Limited Inc.

Liz Claiborne felt that product presentation and the shopping experience were critical to
success and instituted two new programs in those areas: LizEdge, a program designed to
ensure that products are displayed attractively in stores and LizView, a program that
enhances the retail area in which products are sold. Color schemes, fixtures, and signs are
designed to attract customers and to suggest coordinated outfits.

Liz Claiborne and Donna Karan International Inc. signed a strategic licensing agreement
in 1997 to market and distribute two lines of apparel, DKNY Jeans and DKNY Active
throughout the Western Hemisphere. The alliance provided Liz Claiborne with the
opportunity to reach new consumer segments. The company noted that megabrands, such
as the DKNY line, were central to continued growth and market share gains.

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2.4 Products

Liz & Co., a line of petite clothing, was introduced in 1996, as well as dana b. & karen,
the casual career clothing line of the Dana Buchman division. New products included
swimwear and watches. Curve for women, and Curve for men were the company's
newest fragrances. New designs included fitted jackets with zippers, stretch pants, and
five-pocket jeans.

In 1997 the company introduced Liz Claiborne and Elisabeth swimwear and coats, and
extended its line of home accessories to include table linens, placemats, napkins, and
accessories. Dana Buchman Eyewear, featuring sunglasses with sophisticated styling,
were introduced and marketed by Bausch & Lomb.

The company also relaunched the Crazy Horse brand of affordable casual clothing in
1997. The collection was to be available exclusively at J. C. Penney beginning in the Fall
of 1998.

3. Discussion

3.1 Case summary

Liz Claiborne is the largest women’s apparel manufacturer in the world. Liz Claiborne,
founded in the 1980s, grew from a basic sportswear business to become a multifaceted

fashion house. Liz Claiborne has become not only the fashion industry leader but also
one of the most successful companies in the United States today.

Claiborne designs are simple, straightforward fashion that's designed for women who
have more important things to think about than what to wear. Integral to the company's
success is its customer driven planning. A sophisticated computer system, known as
System Updated Retail Feedback (SURF), keeps the company in touch with what is
selling and what is not, around the country, around the clock. A $10 million system of
IBM computers is used to crunch information and produce bound volumes at the end of

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each week. Division heads then determine both short and long-term planning needs
according to customer reactions to particular sales, styles, sizes, and colors. Liz Claiborne
also monitors customer perceptions through personal interaction with customers and
retailers. About 150 specialists around the country have responsibility for talking to
customers as they shop to solicit feedback. The company also has about 18 stand-alone
stores that serve as testing grounds for new ideas. Liz Claiborne keeps in close contact
with retailers, both to make sure they are handling merchandise properly and to field
questions and concerns. The company maintains consistency in the presentation of its
merchandise through a group of about 21 consultants who are responsible for visiting
department stores to ensure that clothes and displays are' arranged uniformly according to
"Lizmap" diagrams. The company also has about 95 customer-service telephone
operators, most of whom are assigned to respond to retailer questions and concerns. In
effect, the customer does the planning for Liz Claiborne..

3.2 Case Questions and Answers

3.2.1 What actions by others in the industry might be of greatest concern to Chazen?
Ans:
Liz Claiborne is in retail garments business sector. This sector is an ever changing sector.
Customer’s preferences changes due to many factors including social, economic, ethnic,
educational factors and many more. Even everything held constant, time is a great factor.
With time, fashion changes. What is hot cake today can be obsolete tomorrow. Modern
fashion of a decade ago is considered as heck today.

Customer’s preference thus is the most important factors. Thus the company who will be
able to best suit the customers will be successful. There are various mentalities of
customers like price conscious, quality conscious, fashion conscious, looking different
etc.

In addition during the 1990 era, the war of IRAQ slummed USA economy forcing many
to cut their live standard. In addition people were shifting towards more casual fashion

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and work place was accepting these casual dresses in the era. Thus more and more people
were searching a fashion which fit their new demand. However Liz was unable to supply
these new products to its customers as it was designing simple, straightforward dresses
for working women.

Thus the main concern of Chazen was to analysis the environment of the economy and
fashion trend and fit the strategies accordingly.

Historically USA is full of fashion designers products who works for the best fit and
there are some cost leader strategic firm like wal-mart. Thus Liz Claiborne have to
analyze the factor which will be profitable for liz Claiborne as the environment does not
seem to favorable.

Besides, Liz Claiborne mainly pursues focus strategy that is to design simple,
straightforward fashion designed for women. It has a niche market of working women.
However the roll was changing and people were searching something that will fit both
home and office. Thus any cost cutting by competitors will switch the cost conscious
customer who is now earning less. In addition failing to maintain present trend might be a
prime reason to switch customer from Liz to fashion house.

3.2.2 Comment on the internal consistency of what is done strategically at Liz Claiborne.
Do goals, strategies, administration and strategic control seem to be in harmony?
Ans:
To comment on whether the goals , strategies and administration are in harmony or not,
we need to sort out the goals, strategies and internal control system.

Goal
To bring women in touch with themselves, not their dreams and design simple,
straightforward fashion that’s designed for women who have more important things to
think about than what to wear. No gimmicks. No surprises.

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Strategy

In the company's 1997 annual report, Chairman Paul Charron noted that the company
was focused intently "on leveraging and extending our core competencies, employing
new technologies and devoting ceaseless energy to make us the world's preeminent
designer and marketer of fashion apparel and accessories."

This was done practically by installing retail feedback software named SURF. They do
collect all the sales and distribution information from their internal SURF system
software. They monitor the pattern of choice from sales data and can gather valuable
sales adjustment for different distribution system. In addition they collect personal
interview of customers to get their feedback because they belief that technology can
supplement but cannot replace the human. Thus they collect their customers thinking by
personal interview. They care and listen to customers for increasing customer’s loyalty.
In addition, they bring the fashion that customers want. From all the above they make
short term and long term demand forecast and make the fashion accordingly.

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 Product development and Distribution strategy: 1990

Administration and strategic control

A sophisticated computer system, known as System Updated Retail Feedback (SURF),

Keeps the company in touch with what is selling and what is not, around the country,
around the clock. A $10 million system of IBM computers is used to ' crunch information
and produce bound volumes at the end of each week.

Liz Claiborne keeps in close contact with retailers, both to make sure they are handling
merchandise properly and to field questions and concerns. The company maintains
consistency in the presentation of its merchandise through a group of about 21
consultants who are responsible for visiting department stores to ensure that clothes and
displays are arranged uniformly according to "Lizmap" diagrams.

From all the above, its clear the goal, strategies and control are in harmony. Internal
management, goals and strategies have no conflict and set towards same outcome.

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3.2.3 What collective strategy opportunities might exist for Chazen to consider?
Ans:
The market is ever changing for textile products due to change of economy, demography,
education, globalization and many. We identified many of the prospect which was
changing during the end of 2oth century namely 1990 and afterwards. Due to those
changes, the strategy needed to be changed accordingly.

Change of economy
During the 1990 USA engaged war with IRAQ and this had adverse effect on economy.
Government spent heavily on the war creating pressure on tax payers as well as national
development budget. The war also created hostile relationship with many coutries and as
a result exports of USA product declined. All this issue created a new problem and that is
firing of employees by many large corporations. Lots of people lost job and demand for
upscale product declined. Many focused on budget products and this created new market
segmentation and that is budget customers. This segment was born from the existing
market and a result existing market size declined for braded products.

Change of Taste
During 1990 customer’s preference started to change towards casual dress. Lots of people
wanted to have something which will be ok with home and office both. Liz had serious
problem with the theme as its market analysis , infrastructure was based on only market
segmentation. Thus liz needed a more dynamic system than before. Liz needed a good
strategy which will cope up with the changed market expectation.

Historically Liz was following focused strategy where it focused on specific market
segment. Its marketing proposition was considered as niche marketing. However Due to
change of the economy and taste of customers, liz needed a new strategy.

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New Collective strategy
According to change of economy and tastes of customers Liz had two new opportunities
as well as one threat. Opportunities were new market segmentation. The growth of
budget customer meant, liz had to go for cost leader strategy. In addition they needed
product line diversification.

Product line diversification

Increasingly people were moving towards casual dress. Many families had working
husband and wife who had less time to shop on separate location . they wanted one stop
solution. So liz could diversified its product for men and children.

Cost leadership strategy

Imports become less costly and already Wal mart was discounting its product using less
costly imported products. Thus liz needed to fight with the strategy by cutting cost.

This two combined strategy would cut cost of liz and also create synergy. By adding
products it could expect expanded market size with reduced distribution cost.

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4. Stock performance of Liz Claiborne:

Many people say, stock performance often reflect company’s performance however in
reality stock price is the indicator of company’s future performance. Most of the analyst
speculate on future performance and take / quit position based on that. 1992 company had
stick to its previous strategy and market hinted that the strategy to stick with previous
strategy is going to be dangerous. Stock price of the company dropped from USD 20 in
January 1992 to just under 10 USD at the end of 1993.

Ironically the company suffered huge set back during the period and the companies actual
performance was as expected by market expert.

There was prolonged slump in the mid-1990s; Liz Clai-borne experienced a reversal of
fortune. Earnings rose 69 percent in 1996, one of the best gains in the apparel business.
Net sales were a record $2.2 billion, with steady gains in women's sportswear, Dana
Buchman products, and the outlet stores. In 1997 Liz Claiborne set another record with

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net sales of $2.4 billion, and earnings per share of $2.65. In addition, strong sales
increases were reported in the Casual Sportswear Group, which includes, LizSport,
LizWear, and Liz & Co. This line was introduced after Liz Claiborne suffered huge loss
due to rigid policy. However from 1994 company started changing and their luck
reversed.

5. SWOT Analysis

Internal Factor Evaluation Matrix

Strengths
1. Strong Fashions – Within any fashion company, the right fashion styles is the key to
their success.
2. Strong Brand Recognition-Liz Claiborne is the largest women fashion ware maker.
3. Almost all brands have a niche focus – Almost all brand units with Liz Claiborne focus
their efforts in one niche market to minimize brand cannibalization.
4. Decentralized Management – Liz Claiborne is able to make decision extremely fast.
Business units make their own decisions.
5. Diverse Brand Portfolio- Liz has a wide variety of brands for its different customers.

Weaknesses
1. No Mission Statement – Liz Claiborne has no companywide mission.
2. No Vision Statement – Liz Claiborne has no companywide vision.
3. Brand Cannibalization Each brand taking away sales from one another.
4. Lack of Focus – Liz Claiborne as a company is not focused on one particular area of
the fashion apparel market.
5. Lack of Brand Idea Sharing – Business units with Liz Claiborne are slow to share
ideas.

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External Factor Evaluation Matrix

Opportunities
1. Expand into Emerging Economies
2. Enter New Product Markets
3. Acquire More Companies
4. Ecommerce Sales – Increase Liz Claiborne’s online ecommerce presence.
5. Expand Standalone Stores – Add new stores for Liz Claiborne’s existing brands that
have stores and those that do not.

Threats
1. Competitors- Liz has lots of well know competitor like walmart, k mart, Gap etc
2. Lose Fashion Edge – Since fashion is the key to a fashion business, there are always
the threats that Liz Claiborne will lose its fashion edge.
3. Politics/ Trade Agreements of Countries – Changes in the world economy and politics
could hamper Liz Claiborne’s company strategies. E.g. tariffs, quotas, wars, embargos,
etc.
4. International Economies – Liz Claiborne’s international presence could stumble with
the economies of those particular regions that they are involved in.
5. Brand Cannibalization – Individual business units could take sales away from one
another.

6. Conclusion
The industry involving high fashion and designer clothes is as tough and competitive. It
is an environment of continuous and unpredictable change. While recognizing the
tradition of Liz Claiborne, Chairman Jerome the changing industry dynamics must be
considered. The fashion industry isn't about clothes and designs at all: it is about
information. It is about people's need to establish themselves in a social pecking order
and associate with a particular social group. Fashionable clothes are communication
devices, they make a statement about the wearer, identifying them with a group and their
position within a group

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