Fashion Unveiled: Macro-Environment Insights, Industry Dynamics, and ASOS Resources - A Comprehensive Exploration

Part 1

The macro environment of the industry

The industry in which the company operates is the fashion industry. The framework for the analysis of the fashion industry's macro-environment involves the PESTEL model; several trends will shape the fashion sector's macro-environment. One of the external environments facing the fashion industry involves technological factors. Digital methods of promotion are gaining importance in the luxury sector (Corzine 2019). Investors are also focused on a business's digital innovations. Luxury businesses need to consider data and analytics to enhance operational visibility with their clients and suppliers. The fashion industry companies are constantly in the race in terms of innovation and adaptation to new technological developments. The changes in fashion brands radically affect operations in the fashion sector. Companies need to redefine their products through innovation and digitizing operations where appropriate.

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Economic factors also influence operations in the fashion industry. The risk of economic recession soon threatens companies' future in the fashion sector. A survey of 55% of fashion businesses indicates that the sector is bound to experience economic problems. The global market is also growing, which implies businesses are likely to encounter competition from unidentified rivals; customers are more focused on price points and product accessibility than brand names. The fashion industry also operates under environmental factors that influence the decisions of luxury businesses. The industry has a long way to go before it can boast of being environmentally friendly. Firms in the luxury sector need to revise their energy consumption, waste disposal, and pollution. Fashion businesses need to use alternative materials that are less harmful to the environment.

Social-cultural factors also influence the fashion industry's external environment. The fashion sector experiences a rampant increase in unacceptance due to a lack of diversity. Clients are looking for businesses that integrate a sense of diversity and cultural inclusion. Most customers are likely to avoid or choose a fashion brand based on societal considerations. Legal factors in the fashion industry involve the difficulties luxury businesses encounter when penetrating large markets. The fashion industry cuts across different countries that have different business regulations. Trade regulations also change over time hence affecting business operations. For instance, the current pandemic has led to the quarantine of client consumption and significant consumer shifts (Amed 2020). The fashion industry also faces political factors which influence its operations. The threat of geopolitical instability affects the decisions of the fashion business. It involves international relations. Geopolitics affects international relations, which affect the fashion industry's operations because it operates in various countries. Therefore, business people in the fashion sector are more pessimistic due to uncertainty.

Part 2

The industries where the company operates

The fashion sector is one of the biggest industries in the world. The fashion sector covers a wide range of activities concerning the manufacturing and distribution of fashion products. The industry is experiencing significant challenges due to a considerable shift in client behavior during the global COVID-19 economic crisis (The Business of Fashion and McKinsey & Co. 2020). Most clients are experiencing personal and financial impacts that are affecting the demand for fashion products. The severity of the pandemic is uncertain, which implies that the fashion sector is in its initial stages of struggle. The fashion sector expects a significant drop in its profits due to the current economic crisis. The pandemic is likely to increase the polarizing nature of firms in the fashion sector.

The fashion industry involves continuous trends, and businesses in this sector require promoting new trends to sell more and remain competitive. The fashion sector is already on high alert concerning its business operations in all geographies. The industry annual report indicates that its outlook is dramatic, bleaker, and on red alert. The fashion industry executives have been pessimistic about 2020 before the outbreak of the pandemic. However, fashion stakeholders are currently planning ways to deal with the pandemic while waiting for the global fashion market to be back to normal. Most retail fashion businesses are currently outsourcing material to avoid supply risks and remain competitive (Nilsson 2020). The fashion sector is extremely competitive because of fashion changes with time.

Analysis of the industry competition

The fashion industry's competitive structure involves the current state of the flow of products in the market. The fashion sector is very competitive, with significant fluctuations in the demand and supply of fashion products. The current pandemic is causing a dynamic evolution in terms of operations in the fashion business. Businesses with considerable digital strength have a high chance of surviving the pandemic. However, the sector is facing difficult times because of the COVID-19 outbreak. The pandemic is likely to shape the competitive environment in the fashion business. The luxury products' glamour draws many businesspeople investors in the fashion sector, hence making it very competitive. The fashion sector's competitive dynamics are uncertain because of concerns over client confidence during the pandemic outbreak. Businesses are working towards reconnecting their supply chain and coping with competition amidst the current global crisis. Economists project that the fashion sector will continue to experience financial challenges even after the COVID-19 economic crisis.

Six forces analysis

The six forces analysis involves the evaluation of the competitiveness and attractiveness of an economic sector. The model allows a firm to determine its position in the market.

Competitive rivalry

The fashion sector is very competitive because it has many businesses with similar product offerings. The businesses sell similar products, but the issue of branding differentiates the products. Companies that incorporate and leverage digital capabilities in their operations have higher chances of attaining a sustainable competitive edge.

Suppliers

Most firms source their material from other countries, and supplies have little control over the supply channel. The pandemic has disrupted trade with China, a major source of materials for most firms in the fashion sector. Most fashion businesses depend on British manufacturers for the supply of products.

The threat of new entrants

The force of new entries is weak in the fashion industry since there is little business in the sector. A new business can formulate unique strategies for popularizing its products and building its brands.

Complementary products

The technology industry complements the fashion sector. Fashion companies that have a strong digital strength have a higher chance of excelling. Technology drives the changes in fashion since it allows for innovations to improve products.

Threat of substitutes

The fashion industry has substitutes at lower prices for customers who cannot afford luxury products. The e-tailors in the fashion sector are well-positioned in the market despite the current economic crisis.

End-user and buyers

The buyers consist of individuals who patronize the services and products of a business. The purchase patterns in the fashion industry depend on consumer behavior. The industry is also experiencing a significant boost due to the pandemic. Some businesses in the fashion sector have been receiving a flood of orders from worried customers (Beard 2020). Businesses expect a surge in orders after the end of the current global economic crisis.

Barriers to entry in the fashion industry

Economies of scale constitute a significant barrier to new entrances into the fashion sector. The cost of entering the fashion industry depends on the level at which a business ventures into fashion. The cost of venturing into a retail fashion business is relatively lower. However, the situation is different if a business is venturing into the fashion business globally because there are large businesses with well-established brand names. When a business grows, it becomes easier to venture into a new sector because it achieves cost advantages. The intensity of competition is high in the fashion industry because of trends in fashion. Product differentiation also constitutes another entrance barrier into the fashion sector. The fashion sector has many businesses with differentiated products; hence a new business may face significant challenges while venturing into the fashion industry. The fashion industry has prominent companies that have strong brand loyalty. New businesses require proper positioning in the market, which involves spending heavily to overcome the existing brands. However, overcoming existing product brands is challenging for a start-up business because of the discounting challenge. Fashion giants can afford to discount their products and attract mid-class clients with their affordable luxury and premium products.

Part 3

Resources and capabilities profile of ASOS

Internal analysis of a company involves the evaluation of its internal capabilities and resources. The examination assesses each resource to determine whether it provides a sustainable competitive advantage. Businesses have both tangible and intangible items that constitute their resources. The substantial resources of a company may involve materials and financial resources. The intangible resources entail branding, human resources, information, technology, and market resources. Business capabilities affect the market, technical, and institutional competencies. Businesses use their resources to reach clients and satisfy their needs at their convenience. For example, Superdry is a fashion company that owns over 500 retail brand outlets in over 50 states, enabling the business to reach a wide range of clients in the world (Superdry 2019). A company's resources determine its competitive capabilities. A business can use its core competencies and help maintain its competitive power and market lead.

The resources of the business involve strategic plans that enable it to keep up with the changing client demands. The consumer environments are often challenging, but companies can survive when they have a high-quality reputation and design detail. Firms need strong values of timely innovation, collaboration, and client passion for succeeding in the fashion sector. Most businesses prioritize customers and put them at the heart of their strategies. In the digital world, social networks, innovation, and the internet are vital in a business. Businesses require focusing on youthful fashion to allow designers to understand young clients better. The fashion sector requires companies to focus on growth opportunities and remain confident in sustainable earnings growth. For example, Superdry launched a fast-fashion youth brand to drive brand innovation (Halliday 2018). The company planned to capture the younger population, consisting of a significant percentage of fashion-driven individuals. Other nimble e-retailers like ASOS have also been successfully targeting the young generation. However, businesses experience significant challenges attracting the young population when they have not been previously popular among young customers.