American
Apparel is a peculiar player of the fashion market, whose action oppose to most
of industry representatives. Common industry practice is to focus on design and
branding issues – to concentrate on the core business, but American Apparel
acts differently, they are fully-integrated: from dye house and knitting factories
to international fashion retail chain. At the same time company cares a lot about
marketing (that may be rather provoking, though cheap and efficient) and
logistics processes. By combining these specific factors company has created
its image and has taken a strong market position – due to their specific
business model that involves harsh control on all levels.
Inbound logistics
Vertical
integration of American Apparel core business has resulted into simplification
of inbound processes – company simply does not need much from the external
environment. Such way of doing things seems a good solution for the company, as
it may always be sure that there could be no problems with suppliers, and the
business will operate almost in any condition of external environment.
Operations
All
of company’s operations except from international fashion retail, takes place
in USA and that is core part of company’s strategy – they could have production
in China with much lower wages, however being a throughout USA brand is what
American Apparel has always been doing. The tag “Made in USA” is really rare, especially
in the fashion industry, so this issue is the core value-adding factor. Company
focuses greatly on the control of its operations and the quality – that is the
consequence of vertical integration, company seeks highest quality at every
stage of production.
Outbound logistics
Company,
represented by its major shareholder and CEO claims that vertically integrated
business model allows to design, cut, distribute and sell an item globally in
just 7 days. Moreover, company does not franchise its foreign fashion retail
operations, and pursues a peculiar strategy with its stores. It focuses on the
principle of spending relatively low amounts on store design and refurbishment.
For example, in USA American Apparel tends to choose locations for their stores,
with rent is about $200 per square foot – company uses low amount of
investments in their distribution premises. At the same time, company operates
and works a lot on an e-shop that is also a very important distribution channel
nowadays, and share of e-sales in company’s financial statement will definitely
be growing in the future.
Marketing & sales
American
Apparel has created a powerful brand that has high recognition and trust
indicators. Company also states, that their brand has a cult status worldwide,
due to their “downtown of LA production”. Share of international revenues has
increased greatly due to expansion that American Apparel has set up. In their
marketing they often use provocative methods that could be considered pretty
much helpful for brand development. At the same time, they have a focus on
quality – so the final picture for the client is really very likely:
good-looking, fashionable clothing of highest quality (that is approved by
“Made in USA” tag). Also, an important issue for company’s marketing activities
is their environmental friendliness that is a very important point in the
decision-making process in their home market, so it was really worth making
such a point. With their approach American Apparel for the client seems to be a
company producing premium-branded clothing with highest quality and no
“unnecessary” value creation points (like stores design). For American Apparel,
marketing function is a cornerstone, that ties together all the peculiarities
of the brand and makes it clear for the customers – why you should buy American
Apparel goods.
Service
Service
for American Apparel mainly stands for the contact with the client – evidently
in the selling points, American Apparel stores. Based on advanced HRM
practices, company has built the atmosphere of support and has set up fair
remuneration, so employees should provide much higher service level – and this
creates additional value to what customers buy.
Company infrastructure
Being
a massive vertically integrated company, American Apparel has a focus on
location of production facilities of their goods – being a strong USA brand,
each item being tagged with that, and there are branding implications from that
point. One specific thing that depicts company’s approach to infrastructure was
installation of a solar battery on the roof of their factory. Acting this way
company attracts attention to its premises and location of the premises – you
always have to fit with local trends in order to succeed.
Human resource management
American
Apparel cares a lot about their employees and offers them a range of extremely
convenient options included in employees’ basic salary. This kind of approach
shows that company wants to establish a relationship with each and every
worker, and the result would be workers extended commitment and higher quality
of work done. Basically, people is the foundation for company’s successful
development in recent years, so it is evidently also a way of creating
additional value (from company’s insight it is much more important, than from customers
point of view).
Technology
Technology
for American Apparel is probably not the most important shape of the business
model, due to business specifics. However, technology is extremely important in
production – the system should be working perfectly and the quality of the
product should always be on top level. Quality of goods is definitely plays one
of major roles in company’s strategy.
Procurement
Due
to the fact that company has internalized its operations greatly throughout vertical
integration process, procurement as a supportive issue that has significant impact
on the process of running business. On the other side, procurement does not
have significant effect on value creation – this supportive function does not
imply that.
Second, very important and effective
communication tool is placing advertising in fashion journals (e.g. Vogue, Elle, GQ, etc.). As most of the
readers of such journals are young metropolitan people, which want to distinguish
themselves through closing, we want to use this mean of advertising for our
second group at the age of 19-23.
Third, we are going to use TV to reach our target audience: co-branding with showmen of Mtv, Muz-Tv (media-persons famous among
our 14-18 age segment). Young people seek for social integration and thus
willing to copy someone or wear popular fashion, so famous people will be
perfect role models. Also, we will use product placement in reality shows which are popular among
youngsters. As we decided, “Vocations in 
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