The Challenge of Increased Competition in the Market

Johnstons of Elgin was one of the giant manufacturers of woollen clothes in the nineteenth century. But with the introduction of globalisation in the market, multinational corporations increased the competition in the market which reduced the market share of Johnstons of Elgin. While, company was at its peak, they expanded its business and for this, they started importing cashmere for developing exclusive range of woven clothes. Just before the globalisation entered into market, in 1973, organization opened another factory in Hawick, Scottish Borders with the motive of manufacturing cashmere knitting clothes.

As Johnstons of Elgin was following traditional manufacturing system due to which organization was not able to produce much quantity, thus, organization was insufficient to fulfil its target audience’s demand. Apart from this, organization was not able to reduce its cost of production due to traditional manufacturing approach and this is the major reason of organization’s failure when globalisation entered into market and multinational corporations took over the market share of traditional textile manufacturers. High cost of production also limited the customer segment for the organization to an extent due to their product’s high prices. After introduction of globalisation, supermarkets were also offering the cashmere and all other products which were sold by Johnstons of Elgin at much cheaper rates, although, there was a huge difference between quality offered by Johnstons of Elgin and supermarkets but with the help of cheaper rates, supermarkets was used to target all customer segments. When Tesco was selling cashmere pashmina at £29, it was also available for £200 in departmental store in Harvey Nicolas which shows the difference in quality sold by multinational corporations (Christopher, 2016).

Johnstons of Elgin believed in vertical integration method of supply chain management. This process is adopted when a company is producing more than one item and all those items are related to each other. Vertical integration system is contrasted to horizontal integration process of supply chain management. With the help of vertical integration system, organization attained sustained growth and overall development in the textile industry for decades. When all companies in the textile industry were shifted to some other business, Johnstons of Elgin was the only traditional manufacturer left in the textile industry after introduction of globalisation. Expansion, adaptation of change, innovation, etc. are some of the key elements of an organizational success. Vertical integration is one of those strategies through which organization could easily attain its desired goals and objectives in relation with the expansion and growth of business. This process is necessary as it helps in maintaining effective relationship with the suppliers of raw materials (Christopher, et. al., 2017). Along with this, this method also procures the market as a platform which is necessary for distributing products to the target audience.  Apart from these advantages, this system is efficient enough to block free competition in the open marketplace and becomes anti-competitive.

Management Strategies for Profitability

Nature of this method is both forward as well as backward through which organizations could easily analyse the requirements of business environment. Apart from this, this method is also used for the purpose of reducing cost of production in terms of transportation expenses, as well as by speeding up the delivery transactions between suppliers and manufacturers for enhancing efficiency as well as for the objective of determining. Motive of application of this system is when an organization controls all processes from their end i.e. from manufacturing to distribution and as per the case study; Johnstons of Elgin was also executing their all tasks from one site and by own. Forward and backward forms of vertical integration process are adopted on the basis of business’ requirements as well as for the objective of enhancing organizational performance (Fawcett, et. al., 2011).

Supply chain management is the process of buying raw materials from suppliers and producing finished products with the help of different resources such as human resources, machinery, etc. Due to globalisation in the UK textile industry, organization shifted its interest from manufacturing cashmere pashmina and other traditional clothes to designer menswear as per the business environment’s requirements. Shifting interest helped the organization in terms of attaining sustainable growth and overall development in the marketplace for a longer period of time. As organization always believed in expansion, organization expanded its product offering by adding womenswear (Hill & Fredendail, 2016). In addition to this, organization also adopted design as the main element for sustaining in the marketplace. With effective designs, organization becomes capable enough to differentiate its products from its competitors and this attribute also helped the organization to approach to the other customer segments which were not yet approached by the organization. In the twentieth century, companies with appropriate and effective designers were meant to be powerful in the marketplace.

In order to face the competition, organization opted for differentiation and customisation strategy in order to gain competitive advantage. With the help of these strategies, organization developed its distinctive image from its competitors which led the company towards overall development and growth. Customisation strategy helped the organization to grab the interest of target audience towards their product offering through which they become capable enough to fulfil their customer’s demands (Helfat & Campo-Rembado, 2016). One side customisation strategy was helping organization to develop its distinctive image in the market whereas on the other hand, it was enhancing exceeding the time taken for production. This was affecting organizational goodwill because they were not able to fulfil their target audience’s demand in appropriate time frame. Increase in cost of production, waste of labour, and other resources were several ramifications faced by the organization due to enhanced time taken for the production of goods as per the target audience’s demands and wants. Competition was also increasing in the market but it was also originating several opportunities for the companies who were operating in competitive business environment in terms of expanding their product offering, moving towards fashioned products as well as for producing the apparels as per the target audience’s requirements (Lambert & Lambert, 2012).

Vertical Integration

Grabbing these opportunities was hard for the organization as it was operating with traditional approaches and all these opportunities were leading Johnstons of Elgin to adopt contemporary approach in order to match up with the trends set by the competitors as well as with the objective of gaining competitive advantage. Organization then adopted design oriented strategy for producing different and unique designed apparels. This helped the organization to develop separate image from the competitors which boosted organizational performance for a while but later on, multinational stores like Tesco, Aldi, etc. started offering advanced products from Johnstons of Elgin at lower rates as compared to Johnstons of Elgin (Lambert & Schwieterman, 2012).

Apart from the drivers of efficiency, organizational success was also dependent over its supply chain mechanisms through which organization was being able to manage all the tasks from one site. These mechanisms play vital role in terms of enhancing organizational performance as well as for the motive of gaining financial as well as reputational advantage. Main objective of supply chain mechanisms is to develop an effective coordination amongst the organizational activities through which organizational operations could be done in a smooth manner. This helped the organization to enhance its performance along with maximising the scope of further improvement and development. Johnstons of Elgin was operating their functionalities on the basis of vertical integration system and this is one of most effective supply chain mechanisms in the supply chain management process (Leonard, 2012). Thus, it leads the organization to grab the opportunities for the purpose of attainment of their desired goals and objectives.      

In terms of enhanced performance of Johnstons of Elgin, major role was supposed to be of effective and efficient employees. Organization was used to believe in collaboration, cooperation and teamwork. Apart from this, employee encouragement was another major tool used by the organization for empowering them to take decisions at their level without getting approval from senior authorities. This helped the organization to fill appropriate confidence amongst the employees through which both organization as well as employees attained their desired goals and objectives (Eriksson, 2018).

Due to globalisation, competition in the apparel industry increased at vast rate which makes survival of traditional manufactures bit difficult. At that time, traditional manufactures were only left with the single option of customisation or producing design oriented apparels. But with the introduction of advanced machineries by multinational corporations, traditional firms were not able to compete with the contemporary firms in an effective manner. This lead the organization towards failure but as organization was used to believe in innovation, creativity and adaptation of change, organization adopted machinery for producing apparels with the combination of traditional designs and latest machinery (Gligor, Esmark & Holcomb, 2015). Apart from this, organization also adopted late-dyeing of yarn in terms of introducing new styles and designs in the apparel and textile industry for the objective of enhancing options for target audience as well as for the objective of grabbing their attention towards organizational products (Meng, 2012).

Driving Efficiencies and Supply Chain Mechanisms

For enhancing the productivity of organization, upstream and downstream production system was adopted by the organization. These production systems were also one of the changes adopted by organization for maintaining its place in the dynamic and competitive business environment. These systems are efficient enough for enhancing organizational performance in today’s business environment. Upstream production system was considered as the initial stage of production process as the main motive was to extract the raw materials from natural resources, or the primary resources. This system is mainly used for extracting minerals, petrol, and other natural elements. Apart from extraction, no further activity is being processed (Gronemeyer, Ditz & Strube, 2014).

Downstream production system includes further stages of upstream production system i.e. from processing the extracted raw materials till making final products are certain crucial elements of downstream production system. With regards to the operations of Johnstons of Elgin, they used to operate their functionalities on the basis of downstream production system because there was no link with the upstream production system as organization was not into extraction of certain sort of raw materials for executing their functionalities (Hammerschmidt, et. al., 2014).

Textile industry was at its peak in the mid-nineteenth century but with the effect of globalisation in twentieth century, textile industry loosed the momentum as multinational corporations took over the market share of traditional firms in textile industry. In 2007, textile industry not much as strong in comparison to the 10 years previously but still, textile industry created huge turnover in comparison to the period where textile industry was huge. In 2007, total number of employees working in textile industry was recorded at 17,000 but this figure was twice a decade before. With the effect of huge turnover, all losses were compensated. Turnover of the whole textile industry was £1 billion including £390 million export sales (Monczka, et. al., 2015).

Number of employees was huge in comparison a decade before in comparison to the number of people in the industry in 2007, but they were not able to fulfil demands of target audience. Major reason behind this success and growth is the adaptation of agile and lean principles of manufacturing process for the objective of gaining competitive advantage (Tseng, 2014). Agile system is known as the essence of supply chain framework and this lead the organization to fulfil its clients’ requirements in an effective manner. The major reason behind the whole industry’s overall success and growth is the adaptation of these frameworks has helped the whole industry for reaching to the huge turnover of £1 billion.

Agile and Lean Logistics Strategies

Along with agile framework, organization has also adopted lean principles for the objective of reducing waste in the production system along with enhancing the productivity. Johsntons of Elgin was used to operate their functionalities with these two frameworks in order to enhance their productivity as well as to attain desired goals and objectives (Wisner, Tan & Leong, 2014).

Conclusion

From the aforesaid information, it can be concluded that adaptation of supply chain management is an effective approach for enhancing organizational performance as well as for the objective of attaining desired goals and objectives. In this report, various frameworks in relation with supply chain management have been discussed. Some of these frameworks discussed in relation with the operations of Johnstons of Elgin are vertical integration, efficiency drivers and supply chain mechanisms, upstream and downstream production system. The last part of the report has discussed the agile and lean production concept in relation with the supply chain management.

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