Table of Contents

Chapter 01 ....................................................................... 4
Introduction..................................................................... 4
1.1 Origin of the Report: .......................................................................................................................... 5
1.2 Purpose of the Study: .......................................................................................................................... 6
1.3 Objectives of the Report: .................................................................................................................... 7
1.4 Methodology: ...................................................................................................................................... 8
1.5 Limitations of the Report: ................................................................................................................... 9

Chapter 02 ..................................................................... 10
Background of the Case ............................................... 10
2.1 History of Company: ........................................................................................................................ 11
2.2Highlights of the company: ................................................................................................................ 11
2.3 Products of CathKidston Limited: ..................................................................................................... 11
2.4 Special Features of CathKidston Limited: ......................................................................................... 12
2.5 Numbers of Stores and Location:...................................................................................................... 13
2.6 Channels of Running Business: ......................................................................................................... 13

Chapter 03 ..................................................................... 14
Analysis of the Economy .............................................. 14
3.1 Economic Recession: ......................................................................................................................... 15
3.2 Economic Boom: ............................................................................................................................... 15
3.4 Response to the Economic Recession: .............................................................................................. 15
3.5 Expansion of Cath Kidston: ............................................................................................................... 16

Chapter 04 ..................................................................... 17
Industry Analysis .......................................................... 17
4.1 Industry analysis: .............................................................................................................................. 18
4.1.1 Porter‘s Five Forces Model:........................................................................................................... 18
4.1.1.1 History of Porter‘s Five Forces Model: .................................................................................. 19

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 4.1.1.2 Elements of Porter‘s Five Forces Model:................................................................................ 19
4.1.1.3 Importance of Using Porter‘s Five Forces Model: .................................................................. 23
4.1.1.4 Criticisms of the Theory: ........................................................................................................ 24
4.1.2 Porter‘s Five Forces Model: Perspective of Cath Kidston ............................................................. 25
4.1.3 PEST/PESTLE Analysis: ............................................................................................................... 30
4.1.3.1 History of PESTLE Analysis: ................................................................................................. 30
4.1.3.2 Variation in the Term ‗PESTLE‘: ........................................................................................... 31
4.1.3.3 Applications of PESTLE Analysis:......................................................................................... 31
4.1.3.4 Elements of PESTLE Analysis: .............................................................................................. 32
4.1.3.5 Advantage and Disadvantage of Using PESTLE Analysis: .................................................... 34
4.1.4 PESTLE Analysis: Perspective of Cath Kidston .......................................................................... 35

Chapter 05 ..................................................................... 41
Analysis of the Company .............................................. 41
5.1 SWOT Analysis: ............................................................................................................................. 42
5.1.1 History of SWOT Analysis: ...................................................................................................... 42
5.1.2 The Purpose of a SWOT Analysis: ............................................................................................. 43
5.1.3 Scope of Using SWOT Analysis:.............................................................................................. 43
5.1.4 The elements of a SWOT analysis: ............................................................................................ 44
5.2 SWOT Analysis: Perspective of Cath Kidston Limited ................................................................... 47

Chapter 06 ..................................................................... 50
Problem Statement ....................................................... 50
6.1 Brief Problem Statement Analysis .................................................................................................... 51

Chapter 07 ..................................................................... 53
Solutions to the Problems and Arising Questions from
the Case .......................................................................... 53
Chapter 08 ..................................................................... 58
Recommendation .......................................................... 58
Page 2 of 61
Conclusion ..................................................................... 61
Bibliography .................................................................. 61
References:.............................................................................................................................................. 61
Websites: ................................................................................................................................................. 61

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 Chapter 01

Introduction

Page 4 of 61
1.1 Origin of the Report:
This report has been prepared as a study on ―Pricing: Understanding and Capturing Customer
Value‖. A Study on Central Insurance Company Limited.‖ as a part of the fulfillment of course
requirement. The report was prepared under the supervision ofMs. Sultana Shahreen Karim, Lecturer
of Dept. of Finance, University of Dhaka. We are very much thankful to her for assigning us with
such type of practical work that has enhanced our knowledge and experience.

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1.2 Purpose of the Study:
The purpose of the study is to find out the suitability of the Cath Kidston‘s pricing system and their
pricing strategy in this modern and dynamic world economy. It also find out the reason behind the
company‘s survival and less impact on its revenue during the great recession of 2009. The case study
also reveal the sustainability of the company‘s pricing strategy.

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1.3 Objectives of the Report:
The main objective of the study is to find out the suitability of the pricing strategy of Cath Kidston .
Again, the study also find out the importance of Cath Kidston stysish products regularly. In broader
sense the objectives to be covered under the study are:

1. To demonstrate some general features and characteristics of Cath Kidston.

2. To identify characteristics of their product.
3. To evaluate its managerial performance during the recession period.
4. To analyse the economic conditions the company faced during its life time.
5. To apply SWOT analysis.
6. To apply industry analysis using Porter‘s Five Forces Model and PESTLE analysis.
7. To analyze industry in which the company belongs .
8. To provide with findings on the basis of the study.

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1.4 Methodology:
For smooth and accurate study everyone needs to follow some rules & regulations. The study
concerned information was collected from secondary sources-

1. Company websites
2. International business journal
3. Academic books

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1.5 Limitations of the Report:
On the way of our study, we have faced some challenges that have been termed as the limitations of
this study. These are followings:

Budgeted time limitation:

It was one of the main constraints that hindered to cover all aspects of the study.

Validity and Reliability:

Validity and reliability of the obtained information depends on the responses from the respondent.

Data Insufficiency:

Especially there was a lack of information about the determination of the organizational structure and
corporate social responsibility of that company. Sufficient books, publications, facts and figure were
not available. These constrains narrowed the scope of accurate analysis. If these limitations had not
been there, the case study would have been more useful and attractive.

In spite of many limitations, we have become successful in preparing the report with sufficient adornment
of flawlessness.

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Chapter 02

Background of the Case

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2.1 History of Company:
CathKidston Limited is an international chain of home furnishing retail stores based in England,
registered with Companies House on 3 April 1993.

Designer CathKidston opened her first shop in London's Holland Park in 1994, selling hand-
embroidered tea-towels and brightly renovated furniture. She later described it as just a
"glorified junk shop". CathKidston was selling those goods which she remembered fondly from
her childhood. CathKidston’s cleaver re-working of “Traditional English Country Style” made her
tiny shop soon become a cult success.

2.2Highlights of the company:

1. Type of company Private
2. Type of industry Home furnishing
3. Founded 13 April, 1993
4. Founder CathKidston
5. Head Quarter London, England
6. Website www.cathkidston.co.uk
7. Area served UK, Euro, US

2.3 Products of CathKidston Limited:

Product of Cath of Kidston Limited has categorized its products in products line and each line
incorporates various brands to captive the market. But at the time of incorporation the picture
was not like that. Initially its products were-

Junck
Towels
Furniture

Vintage Febrics
& Wallpapers

Figure 2.1: Initial Products of CathKidston Ltd.

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Now-a-days CathKidstonLimited offers a huge range of products to their customers at high
premium which their customers pay gladly. The name of the products is mentioned bellow:

Furnishings
Children's
Crockery
Wear

Women's
Cutlery
Wear

Products
Bags Cloths

Bed Linen Toys

Chinda

Figure 2.2: Recent Products of CathKidston Limited

2.4 Special Features of CathKidston Limited:

The products of CathKidston Limited have some unique features that make the company
different from other companies of the same segment of the market. These features are
mentioned bellow:

 Innovative product design and product line extension are core parts of CathKidston’s
brand. It provides the customer an experience of colourful spring.
 It has broad product range offering for using at home , for children and works for both
gift and personal purchases.
 CathKidston is a well knownnostalgic brand.
 It is a seemingly recession proof global lifestyle bran
 The target customers of CathKidston are 30 to 40 years old middle class working women
having stromg purchasing power.

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2.5 Numbers of Stores and Location:
In 2012, CathKidston had 97 shops in the following countries. From a tiny shop ,the CathKidston
Ltd. has became a well-known brand within 19 years. It demonstrate the symbol of efficient
management.Now-a-days, CathKidston Limited is expanding their business throughout the world
rapidly. So, the central management have to face different types of contingent challenges.

Name of Countries Number of Shops

United Kingdom (UK) 57
Ireland 2
Japan 27
South Koria 7
Thailand 3
Taiwan 1

Figure 2.3: Numbers of Stores and Location

2.6 Channels of Running Business:

CathKidston Limited drives their business transactions through different channels.As modern
technology and internet have made the business transaction a very simple task. Mainly its
business is run through-

UK, EURO
& US
Web
transactional
Websites

Wholesale
Mail-order
Divisions

Figure 2.3: Channels of Running Business

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Chapter 03

Analysis of the Economy

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3.1 Economic Recession:
Economic recession is a period of general economic decline and is typically accompanied by a
drop in the stock market, an increase in unemployment, and a decline in the housing market.
Generally, a recession is less severe than a depression. The blame for a recession generally falls
on the federal leadership, often either the President himself, the head of the Federal Reserve,
or the entire administration.

3.2 Economic Boom:

During a boom, there are high levels of economic growth. A boom has a number of
characteristics. Employment levels are high and wages may rise as businesses try to attract
employees. Consumer confidence is strong and consumers have a positive outlook on the state
of the economy. This then causes an increase in demand as people spend more on goods and
services.

Businesses tend to increase their investment during a boom phase and many new businesses
start up. However, during this time there may be an increase in inflation as prices rise in
response to greater demand and increased costs.

3.4 Response to the Economic Recession:

After the starting of the business the brand has faced a great economic recession in 2009. Most
of the brands of the same market segments faces a great loss. But, CathKidston survived the
recession very well through its retro-styling and a rose-tinted antidote in an uncertain economic
climate. The brand is now a seemingly recession-proof “global lifestyle brand”. It saw profits
leap by 60 percent, and sales rose from roughly $30 to $49 million. The reason for this
phenomenon is that in these uncertain times, consumers, although cash-conscious, have an
appetite for nostalgia. The product of CathKidston fulfil consumer needs for value and meaning,
because they are comforting by familiar 1950s aesthetic.

The reasons for which the great recession of 2009 have a little impact on CathKidston are
discussed bellow:

 Customer’s Drive for Nostalgia: Its premium pricing strategy matched with the
customers drive for nostalgiaand it helps to reduce stress. Thus, the value derived from
CathKidston products was enough to justify the high prices for many of its products.
 Customer’s Drive for security and Comfort: In the recession period, consumers’ want a
bit of security and comfort, and this trend shows in the recession of the 2009. And the
retro brand styling give them the comfort and security reminding them of their
childhoods and even their parent’s childhoods.

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  Customer’s Drive for an Antidote to Anxiety: In times of economic downturn, people
are worried about losing jobs, losing purchasing power and thus brands that act as an
antidote to anxiety will do well.
 Unique Design: CathKidston is conquering the world with her floral and polka dot
designs. The key target audiences of CathKidston are 30- to 40-year-old middle-class
working women, their strong purchasing power sustains the growth of the brand.

3.5 Expansion of Cath Kidston:

CathKidston Limited is now at an expansion stage. From its incorporation to still now,
CathKidston has gone through a huge expansion process. In 2012, it ahd 57 shops and
concessions in the UK, 2 in Ireland , 27 in Japan, 7 in South Korea, 3 in Thailand and 1 in Taiwan.

Besides in 2010 the company has formed CathKdiston Group Limited.

The company is collecting international investment to set up their shops in various part of the
world. Through this expansion strategy they are capturing world market share that sector very
rapidly.

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Chapter 04

Industry Analysis

Page 17 of 61
4.1 Industry analysis:
In a simple sense, industry analysis refers to an evaluation of the relative strengths and
weaknesses of particular industries.

In a broader sense, an industry analysis is a business function completed by business owners and
other individuals to assess the current business environment. This analysis helps businesses
understand various economic pieces of the marketplace and how these various pieces may be
used to gain a competitive advantage. Although business owners may conduct an industry
analysis according to their specific needs, a few basic standards exist for conducting this
important business function. Industry analysis facilitates a company's understanding of its
position relative to other companies that produce similar products or services. Understanding the
forces at work in the overall industry is an important component of effective strategic planning.
Industry analysis enables small business owners to identify the threats and opportunities facing
their businesses, and to focus their resources on developing unique capabilities that could lead to
a competitive advantage.

Understanding the industry in which a company operates provides an essential framework for the
analysis of the individual company—that is, company analysis. So, by analyzing the industry
related to our assigned company, we can understand the position of our company.

In this report we will use the following two models as the tools for industry analysis:

I. Porter‘s Five Forces Model

II. PESTEL Model

4.1.1 Porter’s Five Forces Model:

Porter‘s Five Forces analysis is a framework to analyze level of competition within an industry
and business strategy development. It draws upon industrial organization economics to derive
five forces that determine the competitive intensity and therefore attractiveness of an industry.

Whilst understanding the macro-environment is essential for developing companies strategy it

only gives the half of the picture. Company also needs to have a thorough understanding of its
competitors and the impact it can have on its organization. To gain this knowledge companies
need to conduct Porter‘s Five Forces analysis. This analysis is associated with its principal
innovator Michael E. Porter of Harvard University.

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4.1.1.1 History of Porter’s Five Forces Model:
The model of the Five Competitive Forces was developed by Michael E. Porter in his book
―Competitive Strategy: Techniques for Analysing Industries and Competitors‖ in 1980. Since
that time the ‗Five Forces Tool‘ has become an important method for analysing an organizations
industry structure in strategic processes. In 1979 Michael E. Porter of Harvard Business School
identified five key forces that determined the fundamental attractiveness of a market or a market
sector in the long term. This became known as Porter‘s Five Forces model and it provides a
model that enables organizations to analyze their industry in a way that takes competitors‘
activities into account. This is a vital part of creating a strategy, and it is important that managers
understand how it works and how to contribute to it.

4.1.1.2 Elements of Porter’s Five Forces Model:

The five key factors the model uses to identify and evaluate potential opportunities and risks are:

I. Competitive Rivalry
II. Threat of New Entrants
III. Threat of Substitutes
IV. Bargaining Power of Suppliers
V. Bargaining Power of Customers

Elements are presented in the diagram of the next page:

Suppliers‘
bargaining
power

Threats of new
Segment
Threats of
rivalry between substitute
entrants
industry competitors products
competitors

Customers‘
bargaining
power

Fig: Elements of Porter‘s Model

Page 19 of 61
The first three are considered to be ‗horizontal‘ competition (shown as dark blue in the diagram)
because each force is operating in the same way within the market. The remaining two forces are
classified as ‗vertical‘ competition (light blue) because they operate within the supply chain.

The five forces are described below:

i)Competitive Rivalry:

One of the keys to success for organizations is their ability to understand their competitors‘
actions and marketing strategies. The degree to which rivalry exists among competitors varies
between industries and the market sectors within them. There are two indices that are commonly
used when judging competitive edge and those of firm‘s rivals:

 CRx – Concentration Ratio

 HHI – Herfindahl–Hirschman Index

The Concentration Ratio (CRx)

This ratio measures the total output produced in an industry by a given number of corporations.
It will be expressed by using its initials followed by a number.

The Herfindahl–Hirschman Index (HHI)

This is also referred to as the Herfindahl Index, and it is more complex than the CRx. It measures
the size of organizations in relation to the industry and indicates the amount of competition
amongst these organizations. The HHI also gives a greater weighting to larger organizations.

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This index ranges from a value of zero, which indicates a very large number of small
organizations, to one, which represents a monopoly. Therefore the closer the HHI Index is to
zero the greater the level of competition within the sector.

Factors Affecting Competitive Rivalry

There are several things that increase the intensity of rivalry such as:

 A larger number of firms

 Slow market growth
 High fixed costs
 High storage costs
 Low switching costs
 Low levels of product differentiation
 High exit barriers

The larger the number of organizations involved in a market the greater the level of rivalry. This
is because the organizations have more competition when trying to win customers and buying
resources so rivalry can be quite aggressive. This becomes more intense the more equal each
company‘s market shares is as they all strive to become the market leader.

ii) Threats of New Entrants:

Profitable markets that yield high returns will attract new firms. This results in many new
entrants, which eventually will decrease profitability for all firms in the industry. Unless the
entry of new firms can be blocked by incumbents.

The following factors can have an effect on how much of a threat new entrants may pose:

 Government policy
 Capital requirements
 Absolute cost
 Cost disadvantages independent of size
 Economies of scale
 Economies of product differences
 Product differentiation
 Brand equity
 Switching costs or sunk costs
 Expected retaliation
 Access to distribution
 Customer loyalty to established brands
 Industry profitability


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iii) Threat of Substitute:

Substitutes can be defined as those products or services that meet a particular consumer need but
are available in another market. A substitute product is a product from another industry that
offers benefits to the consumer similar to those of the product produced by the firms within the
industry.

The threat of substitution affects the competitive environment for the organizations in that
industry and influences their ability to achieve profitability because consumers can choose to
purchase the substitute instead of the industry‘s product.

This can be a significant issue as it constrains the ability of suppliers to raise prices, even though
this may be in all of their interests. For example, the price of newspapers is constrained by the
existence of online news and TV news channels. The availability of these (more or less) free
services has meant that the newspaper industry has been unable to increase its prices in line with
rising costs even though almost all newspaper publishers would like to do so.

As part of analysis using Porters Five Forces model, organisations need to look outside of their
own industry and think about those substitutes that pose a threat to their market.

The threat of substitutes is high when:

 Consumer switching costs are low

 Substitute product is cheaper than industry product
 Substitute product quality is equal or superior to industry product quality
 Substitute performance is equal or superior to industry product performance

The threat of substitutes is low when:

 Consumer switching costs are high

 Substitute product is more expensive than industry product
 Substitute product quality is inferior to industry product quality
 Substitute performance is inferior to industry product performance
 No substitute product is available

iv) Bargaining Power of Suppliers:

Any organization needs raw materials and this creates buyer–seller relationships between the
market and the suppliers. The distribution of power within such relationships varies, but if it lies
with the supplier then they can use this influence to dictate prices and availability. Organisation
need to assess the balance of power within its own market as part of using Porter‘s model.

Suppliers may work together to increase bargaining power, although this is usually against the
law in developed countries where legal redress is available if such actions are discovered.

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Supplier bargaining power is high where:

 There are few suppliers and many buyers

 The cost of switching from one supplier‘s product to another supplier‘s
product is high
 Suppliers can begin to produce the buyer‘s product themselves
 The buyer is not price sensitive and is uneducated regarding the product
 The supplier‘s product is highly differentiated
 The buyer does not represent a large portion of the supplier‘s sales
 Substitute products are unavailable in the marketplace.

v) Bargaining Power of Customers:

Organization should also assess the extent to which its customers or buyers have bargaining
power. In a situation where customers have a strong position they can bring considerable
pressure to the market and demand improved quality and/or lower prices.

There are several key factors that increase the bargaining power of customers:

 Customers are more concentrated than sellers

 Switching costs for customers are low
 Customer is well educated regarding the product
 Customer is price sensitive
 A large portion of a seller‘s sales is made up of customer purchases
 The customer‘s own product or service is affected
 There is little differentiation between products
 The threat of backward integration is high.

The extent to which customers can influence the market depends on their level of concentration
or how well organized they are. Many small farmers produce fruit and vegetables, which they are
contracted to sell to their customers, the supermarkets. The smallholder has to meet the strict
quality control imposed on them by the supermarkets or risk losing the contract. This enables the
supermarkets, as the customers, to exert pressure on these small suppliers.

The degree to which customers are able to manipulate market forces is swayed by the how
significant their purchases are in terms of the su:pplier‘s revenue.

4.1.1.3 Importance of Using Porter’s Five Forces Model:

Five Forces Analysis can provide valuable information for three aspects of corporate planning:

Statistical Analysis:

The Porter‘s Five Forces Analysis allows determining the attractiveness of an industry. It
provides insights on profitability. Thus, it supports decisions about entry to or exit from and

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industry or a market segment. Moreover, the model can be used to compare the impact of
competitive forces on the own organization with their impact on competitors. Competitors may
have different options to react to changes in competitive forces from their different resources and
competence‘s. This may influence the structure of the whole industry.

Dynamical Analysis:

In combination with a PESTLE Analysis, which reveals drivers for change in an industry,
Porter‘s Five Forces Analysis can reveal insights about the potential future attractiveness of the
industry. Expected Political, Economical, Socio-demographical, Technological, Legal and
Environmental changes can influence the five competitive forces and thus have impact on
industry structures.

Analysis of Options:

With the knowledge about intensity and power of competitive forces, organizations can develop
options to influence them in a way that improves their own competitive position. The result
could be a new strategic direction, e.g. a new positioning, differentiation for competitive
products of strategic partnerships

4.1.1.4 Criticisms of the Theory:

Whilst the Porter‘s Five Forces model has its benefits there are certain considerations one should
bear in mind when using it. Many of these come from the fact that it was developed in an
environment that was quite different to the one organization find themselves operating in today.

These considerations are:

 Pace of change is now more rapid.

 Market structures were seen as relatively static.
 The model provides only a snapshot of business environment.
 It can be difficult to define the industry
 The model does not consider non-market forces
 The model is most applicable for analysis of simple market structures
 The model is based on the idea of competition.

Despite these factors, Porter‘s Five Forces model has a role to play in helping management to
evaluate and assess their current market environment. It provides an excellent foundation for the
further research and intelligence gathering needed to formulate an organization‘s future strategy.

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4.1.2 Porter’s Five Forces Model: Perspective of Cath Kidston
i) Competitive Rivalry:

In case of competitive rivalry among the firms in the industry we have found the following
conclusion.

Factors increasing forces are:

1. Low concentration among the firms

2. Large number of firms
3. High exit barriers

Factors increasing forces are:

1. Low fixed costs

2. Low storage costs
3. Higher market growth
4. High levels of product differentiation

Explanation:

By using concentration ratio we have found that concentration among the firms in the homeware
and fashion industry is low. To find the concentration ratio we used the sales of four largest firms
of that industry. We use the sales of Marks & Spencer, Next UK, Arcadia Group, Primark Stores
as that four firms had the high volume of sales at that time in that industry. Then the sum of the
sales of those four firms was divided by the total sales of the industry. Thus we found the
3135000000 +2717000000 +1463000000 +627000000
concentration ratio is ( ) =38% which shows
20900000000
the low concentration based on the following concentration levels. The lower concentration ratio
is, the higher competition exists.

Concentration levels:

 No concentration - 0%
 Low concentration - 0-50%
 Medium concentration - 50-80%
 High concentration - 80-100%
 Total concentration - 100%

The competitiveness in the industry is relatively high due to the number of big and small players
in the fashion industry. Particularly, in the high end, there are a good number of designers which
compete with similar products within the same customer base. However, it is important to
recognize that the competition in luxury fashion is not based on price but rather on image

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perception and brand value and quality. So, in that case Cath Kidston gets some competitive
advantage.

The exit barriers in that industry are very high. As a result, the competition among the firms is
also very high. There are circumstances where the costs of abandoning the investment in the
specialist assets required to manufacture product are too great. When faced with high exit
barriers most organizations continue to operate despite the product often being unprofitable. In
the UK, in case of homewares and fashion industry those barriers are very high. So, firms in that
industry face competition.

In case of Cath Kidston, the market growth rate was increased by 6% which was greater than that
of many firms in 2014.

Cath Kidston also maintains the high levels of product differentiation and so its customers are
very loyal.

Thus low fixed costs, low storage costs, higher market growth, high switching costs and high
levels of product differentiation helped Cath Kidston to lower the competitive rivalry.

So, after analysing the pros and cons of this forces for the Cath Kidston we can say the pressure
of competitive rivalry is medium.

ii) Threats of New Entrants:

Factors increasing forces are:

1. Entry of the overseas competitors

2. Online start up

Factors lowering forces are:

1. Distinct products
2. Barriers to exit
3. Lots of competitors,
4. Poor economic situation

Explanation:

Overseas competitors have entered the industry in the past. It is possible more may enter in the
future

Online is very easy for new competitors to start up a new business and many fashion companies
are being established in this way.

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Cath Kidston tries to maintain distinct design in its products. Even though there are many
companies offering homeware and fashion products, Cath Kidston‘s distinctive design positions
itself away from competitors therefore no close rivals.

In case of homeware and fashion industry, formalities and high exit costs are barriers to exit.
These kinds of barriers discourage firms to enter and compete with others.

So, after analysing the positive and negative side of entrants of new firms, we can conclude that
the threat of entry of new competitors into the homeware and fashion industry is medium.It
requires huge capital investments in order to be competitive and to establish a brand name.
Therefore, new entrants have to produce something at an exceptionally low price and/or high
quality to establish their market value.

iii) Threat of Substitute:

From the viewpoint of Cath Kidston the following factors increase the threat of substitute:

1. Limited and narrow product offerings.

2. High charge compared to competitors

Factors lowering forces are:

1. Higher product quality

2. Substitute product quality is inferior
3. Customer loyalty

Explanation:

The main weakness of Cath Kidston is its product offerings are still relatively limited and narrow
compared to its competitors.

Cath Kidston tries to differentiate products and so it charges higher compared to its competitors.
This can also be a threat in this field.

On the other hand, Cath Kidston‘s product quality and customer loyalty may help to lower the
threat of substitute.

So, based on the above factors we can say that threat of substitute is low in case of Cath Kidston.

iv) Bargaining Power of Suppliers:

Factors lowering forces are:

1. Availability of substitutes
2. Representing a large portion of supplier‘s sales
3. Large number of suppliers

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 4. Low switching costs

In case of Cath Kidston, bargaining power of suppliers is lower because of its large number of
suppliers. It is not confined to a small number of suppliers only

It should be noted that the suppliers are inclined towards major food and grocery retailers and
dread losing their business contracts with large supermarkets. Hence, the position of the Cath
Kidston is further strengthened and negotiations are positive in order to get the lowest possible
price from the suppliers.

In case of Cath Kidston we have found no factors that are liable to increase the bargaining power
of suppliers. So, it can be easily concluded that the bargaining power of suppliers is very low
towards Cath Kidston.

v) Bargaining Power of Customers:

As an esteemed brand, Cath Kidston faces the following factors that increases the bargaining
power of its customer:

1. Lots of sellers
2. Low switching costs
3. Price sensitivity of customers

Factors lowering forces are:

1. Differentiated products
2. Traditional and loyal customers
3. Facility to shop online
4. Value added pricing strategy
5. Distinct product design

Explanation:

In the market Cath Kidston has many competitors. So, buyers easily can switch to competitors
products.

Because of the high competition and many brands within the industry, there are low switching
costs for the buyer. This is complemented by online shopping, which means that the retailers do
not even need to be physically in the same place. This lowers the switching costs for the buyer
and increases their power.

As Cath Kidston follows value based pricing, the customers having the price sensitive nature
may avoid its products.

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On the contrary, Cath Kidston offers differentiated products compared to its competitors. Again
it has a large number of loyal customers. So, these factors help Cath Kidston to lower the
bargaining power of customers.

So, based on our analysis we can say bargaining power of customers toward Cath Kidston is
medium.

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4.1.3 PEST/PESTLE Analysis:
Aside from the company‘s internal resources and industry factors, there are several other macro-
economic factors that can have a profound impact on the performance of a company. In
particular situations such as new ventures or product launch ideas, these factors need to be
carefully analyzed in order to determine how big their role in the organization‘s success would
be. One of the most commonly used analytical tools for assessing external macro-economic
factors related to particular situation is PEST Analysis.

PEST is an acronym for Political, Economic, Social and Technological. This analysis is used to
assess these four external factors in relation to particular business situation.

Basically, a PEST analysis helps to determine how these factors will affect the performance and
activities of a particular business in the long-term. It is often used in collaboration with other
analytical business tools like the SWOT analysis and Porter‘s Five Forces to give a clear
understanding of a situation and related internal and external factors.

PESTEL/PESTLE analysis is an extension of PEST that is used to assess two additional

macroeconomic factors. These factors are the Legal and Environment conditions that can have an
impact on the company.

4.1.3.1 History of PESTLE Analysis:

In examining the PESTLE Analysis history and application, one must first go back to the roots of
the PESTLE factors and discuss how they are applied in today's project management
environment.

The PESTLE Analysis history is quite vague. There is no major documentation of credits given
to any particular individual or organization for pioneering this analysis. However, from citations
and records of its earliest uses, there are a few individuals who are considered important in
connection with the same.

Francis J. Aguilar: In 1967, there was a mention of Aguilar in "Scanning the Business
Environment", where he discussed the environmental factors affecting a business. He gave them
the acronym "ETPS" to indicate the "Economic, Technical, Political, and Social" factors.

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Arnold Brown: In the early 1970's, Brown focused on "STEP" (Strategic Trend Evaluation
Process) and outlined the environmental factors as STEPE (Social, Technical, Economic,
Political and Ecological).

1980+: After a decade of Brown's STEPE analysis, many people tried to define the
environmental factors in many ways, thus resulting in PEST, PESTLE, STEP and STEEPLE
analysis.

By following the history of the acronym PESTLE, we reach the conclusion that the PESTLE
analysis became popular from the second half of the twentieth century. It outlines the need for
conforming to environmental factors and also makes use of these mentioned environmental
factors towards the success of the project.

4.1.3.2 Variation in the Term ‘PESTLE’:

Various variations of the term PESTLE are given below:

 ETPS—Economic, Technical, Political, and Social

 STEP—Strategic Trend Evaluation Process
 STEPE—Social, Technological, Economic, Political, and Ecological
 PEST—Political, Economic, Social, and Technological
 STEEPLE—Social, Technological, Economic, Ethical, Political, Legal, and
Environmental
 PESTLIED—Political, Economic, Social, Technological, Legal, International,
Environmental, and Demographic
 STEEPLED—Social, Technological, Economic, Environmental, Political, Legal,
Educational, and Demographic.

The important thing to note is that these are all just variations of the one analysis tool; the
underlying method is the same in all cases.

4.1.3.3 Applications of PESTLE Analysis:

As a manager, one is most likely to be involved in these sorts of discussions when his/her
organization is:

1. Planning to launch a new product or service

2. Exploring a new route to market

3. Selling into a new country or region

It is also a useful technique to know if anyone is a part of a strategic project team. In all of these
instances, there is a need to assess the potential impact of external factors from both an
operational and a market perspective.

The other scopes of using PESTLE analysis are:

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 1. Business Planning:

PESTLE Analysis forms a safe start for a business endeavor. It provides the management with
data, feedback and information about the factors involving a business decision. When used along
with the SWOT Analysis, it can help identify the major threats and opportunities that a business
decision will face.

2. Marketing:

PESTLE Analysis greatly influences the marketing environment of a product or service. It also
determines the strategies adopted in marketing based on information obtained through this
analysis.

3. Product Development:

In order to decide on a product to be developed, knowing the external factors of the project via
the PESTLE Analysis helps this decision making.

4. Organizational:

While PESTLE Analysis takes into account the major external features, it also affects the
organizational structure, especially when decisions in changes to be made come into play. For
example, it may concern the political makeup of the organization or the fiscal factor of project
funds

4.1.3.4 Elements of PESTLE Analysis:

Before going to the analysis, we need to understand what each of these factors in this analysis
signifies. The diagram represented in the next page shows the elements of PESTLE analysis:

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 Political

Environmental Economic

Legal Social

Technological

Fig: Elements of PESTLE Analysis

i) Political – Here government regulations and legal factors are assessed in terms of their ability
to affect the business environment and trade markets. The main issues addressed in this section
include political stability, tax guidelines, trade regulations, safety regulations, and employment
laws.

ii) Economic – Through this factor, businesses examine the economic issues that are bound to
have an impact on the company. This would include factors like inflation, interest rates,
economic growth, the unemployment rate and policies, and the business cycle followed in the
country.

iii) Social – With the social factor, a business can analyze the socio-economic environment of its
market via elements like customer demographics, cultural limitations, lifestyle attitude, and
education. With these, a business can understand how consumer needs are shaped and what
brings them to the market for a purchase.

iv)Technological – How technology can either positively or negatively impact the introduction
of a product or service into a marketplace is assessed here. These factors include technological
advancements, lifecycle of technologies, the role of the Internet, and the spending on technology
research by the government.

v) Legal - Legal factors include discrimination law, consumer law, antitrust law, employment
law, and health and safety law. These factors can affect how a company operates, its costs, and
the demand for its products.

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vi)Environmental - Environmental factors include ecological and environmental aspects such as
weather, climate, and climate change, which may especially affect industries such as tourism,
farming, and insurance. Furthermore, growing awareness of the potential impacts of climate
change is affecting how companies operate and the products they offer, both creating new
markets and diminishing or destroying existing ones.

4.1.3.5 Advantage and Disadvantage of Using PESTLE Analysis:

To maximize the benefit of the PESTLE Analysis it should be used on a regular basis within an
organization to enable the identification of any trends. The impact of a certain external factor
may have more severe consequences for a particular division or department and the PESTLE
technique can help clarify why change is needed and identify potential options.

Advantages

 Provides a simple and easy-to-use framework for analysis.

 Involves cross-functional skills and expertise.
 Helps to reduce the impact and effects of potential threats to organization.
 Aids and encourages the development of strategic thinking within organization.
 Provides a mechanism that enables an organization to identify and exploit new
opportunities.
 Enables to assess implications of entering new markets both nationally and globally.

Disadvantages

 Users can oversimplify the information that is used for making decisions.
 The process has to be conducted regularly to be effective and often organizations do not
make this investment.
 Users must not succumb to ‗paralysis by analysis‘ where they gather too much
information and forget that the objective of this tool is the identification of issues so that
action can be taken.
 Organizations often restrict who is involved due to time and cost considerations. This
limits the technique‘s effectiveness as a key perspective may be missing from the
discussions.
 Users‘ access to quality external information is often restricted because of the cost and
time needed to collate it.
 Assumptions often form the basis for most of the data used, making any decision made
based on such data subjective.

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4.1.4 PESTLE Analysis: Perspective of Cath Kidston
PESTLE analysis helps to decide managers in a new business plan. So, PESTLE analysis may
help Cath Kidston in introducing a new project. The PESTLE framework below analyses the
dynamic and unpredictable environment in which Cath Kidston operates by identifying the
forces that have the most impact on Cath Kidston‘s performance. So, from this point of view we
are going to discuss PESTLE analysis.

i) Political:

Cath Kidston will be influenced by following political factors:

1. Rate of tax levied by the government

2. Interest rates
3. Government decision about euro zone
4. Uk political system

Explanation:

There are a wide range of political factors which affect Cath Kidston at present but also factors
which may have an impact upon the company in the future. One key political decision which
affects Cath Kidston in the UK is the rate of tax levied by the government. This has the ability to
affect both the bottom line of the company in the form of corporation tax but also the ability of
customers to spend with Cath Kidston, linked to income tax. At present, levels of corporation tax
in the UK have been lowered in order to attempt to stimulate economic activity. However, given
the continuing deficit, there is no guarantee that governments in the future will maintain the rate
of corporation tax at its current level.

Other key political decisions consider interest rates. At present, UK interest rates stand at an all-
time low of 0.5%. This may be seen as a positive factor for firms such as Cath Kidston who are
effectively able to borrow large amounts of money for the purposes of capital expansion at much
lower rates than have been previously seen. Such borrowing may take place in the form of long
term borrowings from banks and financial institutions, alternatively the company may choose to
issue corporate bonds.

Other political issues relate to the governments relatively "arm's length" approach to Europe and
remaining outside of the single currency area. For a UK based business such as Cath Kidston that
has international operations in the Euro Zone, this could be seen as negative with the prospect of
foreign exchange rate risks being felt and the introduction of additional transaction costs which
would be eliminated if the government decided to join the Euro Zone.

From a more general perspective, the UK political system based upon parliamentary democracy
may be seen as providing Cath Kidston with a relatively low risk political environment in which
to operate within. This may be seen as an advantage in comparison some of Cath Kidston's

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ventures into potentially less stable political nations such as Russia and those of the Middle East.
As such, this makes the UK a relatively safe market for Cath Kidston to make further long term
capital investments in where the company may think twice in the case of less stable political
environments.

ii) Economic:

In case of Cath Kidston the influential economic factors are:

1. Current state of the economic environment

2. Effect of recesssion
3. Level of unemployment

A critical factor which may have an impact upon Cath Kidston in the UK is the current state of
the economic environment. As a business which makes use of a premium based differentiated
strategy, as opposed to being a cost leader, it may be seen that swings within the economic
environment have the ability to impact the fortunes of the company to a greater degree than those
operating in the necessity and budget sector of the market (Johnson et al, 2008).

From a purely statistical perspective, the years since 2007 have been an economic rollercoaster
for the UK. Following the onset of the global financial crisis in 2007, the subsequent year saw
GDP growth revert to negative figures with -1% contraction in the economy. This was followed
by even worse performance in 2009 with a -4% contraction. Low levels of growth have been
seen since in 2010 and 2011 with GDP growth of 1.8% and 0.8% respectively (World Bank,
2013). However, while the statistics show a slight recovery in 2010 and 2011, others within the
business press indicate that the UK economy could continue to flat line or worse result in a
"double dip" recession. These headline figures may seem to paint quite a negative picture for
retailers such as Cath Kidston which are highly reliant on the UK economy as a source of
revenue. However, an analysis of more detailed economic data may highlight a different
perspective.

Tutt presents data which looks at the level of unemployment and household disposable incomes
in the UK. In this case an alarming pattern is seen. On the one hand, levels of unemployment
have been increasing in recent years with a rise from 0.86m in 2007 to 1.53m in 2011. However,
conversely, the levels of disposable income of individual households during the period have
consistently risen from £14,308 per household in 2007 to £16,042 per household in 2011. For
Cath Kidston and other premium end retailers this may have a key impact upon strategy. While
there may be few customers able to buy the products and services of Cath Kidston due to rising
unemployment, those who have remained in employment have generally become wealthier. As a

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result it is likely that such economic patterns may help Cath Kidston to improve its average
spend per customer, even if the total number of customers falls.

iii) Social:

There are many social and cultural changes taking place in the UK at present which may have a
high level of impact upon the performance of retailers such as Cath Kidston. In many cases, as
representatives of an essentially socio-cultural industry, the homeware and fashion industry itself
may be seen as an industry which is affected by such trends to a greater degree than other
industries. Socio- cultural factors that may influence Cath Kidston are:

1. General aging of the population

2. Increased cultural diversity

Explanation:

One of the key issues in the UK market, but also seen across Cath Kidston's wider European
markets is the general aging of the population. This may be seen as both problematic but also an
opportunity for Cath Kidston. One the one hand, an ageing population may see Cath Kidston
having to adapt its product portfolio in an attempt to ensure that the products supplied by
company appeal to this aging demographic of the population. In addition, the prospect of an
aging population may also see that competition for the increasingly smaller younger
demographics of the market becomes more intense for Cath Kidston as time progresses. Despite
these drawbacks, there are also advantages linked to the issue. On consideration is that ageing
populations tend to be less mobile than younger demographics, this may be a key advantage for
Cath Kidston given that its home delivery and online business model offer a convenient solution
to the problem.

Other socio-cultural factors include the consideration that the UK has since World War II
become an increasingly culturally diverse nation with an influx of diverse cultures, races and
ethnicities all contributing towards the socio-cultural backdrop of the UK social system. For Cath
Kidston, this has not only external implications such as those linked to aligning product ranges to
specific cultural segments, in addition, the company must also ensure that it deals with issues
such as managing diversity in the context of its own organisation. In this case, increased cultural
diversity can be seen as both a source of a competitive advantage yet also a potential source of
conflict. As EU expansion takes place and the new member states become further integrated into
the EU, there is a distinct possibility that the trends for increased diversity in the UK's labour and
consumer markets will increase rather than decrease.

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 iv) Technological:

Technological factors that influence Cath Kidston are:

1. Internet
2. Wide spread diffusion of broad band.
3. Online social networking
4. Developments of smartphones and "apps‘‘

Explanation:

There is little doubt that new technological developments have transformed the UK business
environment, especially those operating in the retail sector. Key developments may be seen as
those technologies which are internet or communications based in nature, such as the wide
spread diffusion of broad band.

Key technological developments such as the internet have allowed firms such as Cath Kidston to
develop online business models which complement traditional bricks and mortar retail
establishments. Empirical evidence shows that the growth has been almost exponential with a
rapid acceptance on the behalf of customers of online shopping in both retail and other markets.

Yet communications technologies have not only been used by the sector to facilitate online sales
and shift away from the traditional high street "place." Other aspects of new technological
development have seen a range of new marketing options opened up to retailers such as Cath
Kidston. Most important amongst these are developments which have allowed retailers to
interact with customers using online social networking sites such as Facebook, YouTube and
Twitter. These are now seen as key ingredients in the development of a successful marketing
strategy, largely the product of technological changes in the sector.

Other technologies have simply allowed businesses to develop better relationships with their
consumers and communicate in a more effective way. Take for instance the technological
developments of smartphones and "apps." Such technology has allowed companies to develop
apps which allow consumers to find their nearest branch or check the facilities and product
availability at a branch before making a visit. This allows an effective bridge to be built between
the purely online business model such as those operated by a company like Amazon and those
falling into the "bricks and clicks" category such as Cath Kidston who must seek to leverage the
benefits of both arms of the business.

While technology in this section has largely been presented as an opportunity, there is of course
a risk factor.

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 v) Legal:

Like all businesses, Cath Kidston must conform to the legal minimum standards which are
enforceable in a jurisdiction. Some of the key legal regulations which affect Cath Kidston in the
UK are considered below:

1. Minimum wage legislation

2. Equal opportunities legislation
3. Issues of tax avoidance

Explanation:

A key piece of legislation in the UK which affects organisations such as Cath Kidston a large
number of low paid workers is that of various minimum wage regulations. In this case, the
legislation requires UK employers to pay their employees a minimum of £6.19 per hour for those
aged over 21. Given the large number of employees of firms such as Cath Kidston which are
affected by the National Minimum Wage, temporary shifts in legislative policy can have a high
impact upon the sector.

Other key legislative issues include equal opportunities legislation and various other acts of
parliament designed to ensure equality both in the work place and in the recruitment and
selection process. In this case, such legislation has a direct impact upon the processes and
practises of an organisation such as Cath Kidston who are required not only to design corporate
polices which facilitate equality but also to record activities related to recruitment and selection
should an employee call foul at a later date. The issue here for businesses such as Cath Kidston is
that the legislative environment often places the burden of proof on the defendant rather than the
claimant in such cases. As such, the development of detailed HR processes and practises is
critical.

Further issues relate to potential moves on the behalf of legislators to become tougher in relation
to issues of tax avoidance. While Cath Kidston has to date not been implicated in any of the tax
avoidance scandals, there is a consideration that the actions of other retailers such as Starbucks
and Amazon may have provoked the onset of a tougher legislative environment in the future
which may have an impact upon innocent parties such as Cath Kidston.

vi) Environmental:
The physical environment is also a key issue for firms operating in any given national market
and consideration should be considered to how firms treat the physical environment and the
impact this has on the business, but also the impact the physical environment generally has upon
a business. The environmental factors affecting Cath Kidston are:

1. Rising interest in environment issue

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 2. Considering green management
3. Environment friendly packaging

Explanation:

In general terms, the physical environment which Cath Kidston operates within in the UK may
be seen as relatively benign in comparison to other parts of the world which suffer from high
intensity natural disasters such as earthquakes, hurricanes and forest fires. Despite such an
environment there have been a number of environmental issues recently in the UK which have
affected the retail sector. These have included increasing more frequent floods and poor sales
due to snow storms and the failure of local authorities to prepare for periods of inclement
weather.

Other aspects of the environmental analysis require firms to consider their own impact upon the
environment. In general terms, the literature considers that consumers are becoming increasing
aware of the impact of businesses upon their environment. As such, if businesses are to maintain
customer loyalty and avoid negative backlashes, then they must seek to minimise their impact
upon the environment. In the retail sector, this may include reducing waste, running more
efficient transport operations and implementing ethical sourcing policies. While failure to
comply with such consumer demands may result in a negative consumer backlash, with the
adoption of the right approach, high environmental credentials can be used to add value to a
product or service.

Environmentally friendly, reduced packaging is being promoted by the Government. It has been
found by the Office for National Statistics (2010) that the percentage of consumers using
reusable bags has risen from 71% to 74% and that those trying to cut down the number of plastic
bags they take from the shops has risen from 65% to 68%. This assists in reducing the overall
cost and is good for Cath Kidston‘s corporate social responsibility image.

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Chapter 05

Analysis of the Company

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5.1 SWOT Analysis:
A SWOT analysis is commonly used in marketing and business in general as a method of
identifying opposition for a new venture or strategy. Acronym for Strengths, Weaknesses,
Opportunities and Threats, this allows professionals to identify all of the positive and negative
elements that may affect any new proposed actions.

It is impossible to accurately map out a business's future without evaluating it from all angles,
which includes an exhaustive look at all internal and external resources and threats. A SWOT
accomplishes this in four straight-forward steps that even rookie business owners can understand
and embrace.

Figure 5.1: SWOT Analysis

5.1.1 History of SWOT Analysis:

This remarkable piece of history as to the origins of SWOT analysis was provided by Albert S
Humphrey, one of the founding fathers of what we know today as SWOT analysis. The origins
of the SWOT analysis technique is credited by Albert Humphrey, who led a research project at
Stanford University in the 1960s and 1970s using data from many top companies. The goal was
to identify why corporate planning failed. While working on a research project at the Stanford
University sometime around 1960s to 1970s, Albert Humphrey developed an analytical tool to
evaluate the strategic plans and find out why corporate planning failed. He coined this technique
as SOFT analysis where –

S stood for what things are Satisfactory at present,

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O denoted what Opportunities can be explored in the future,

F meant the Faults in the present and

T signified the Threats that could surface in the future.

In 1964 Urick and Orr at a conference changed the F to a W, and it has stuck as that, soFt to
sWot.

5.1.2 The Purpose of a SWOT Analysis:

The SWOT analysis enables companies to identify the positive and negative influencing factors
inside and outside of a company or organization. The main purposes of SWOT analysis are-

1. To help decision makers and compare ideas.

2. To bring a clearer and common purpose and understanding of factors for success.
3. To organize the important factors linked to success and failure in the business world.
4. To analysis issues that have led to failure in the past.
5. To provide linearity to the decision making process allowing complex ideas to be
presented systemically.
6. To revise plans to best navigate systems, communities, and organizations
7. As a brainstorming and recording device as a means of communication
8. To enhance ―credibility of interpretation‖ to be utilized in presentation to leaders or key
supporters.

5.1.3 Scope of Using SWOT Analysis:

SWOT is meant to be used during the proposal stage of strategic planning. It acts as a precursor
to any sort of company action, which makes it appropriate for the following moments:

 Exploring avenues for new initiatives

 Making decisions about execution strategies for a new policy
 Identifying possible areas for change in a program
 Refining and redirecting efforts mid-plan

The SWOT analysis is an excellent tool in organizing information and presenting solutions,
identifying roadblocks and emphasizing opportunities.

Besides ,the above mention fields here are some examples of when a SWOT analysis can be used
to assess:

 A company (its position in the market, commercial viability, etc)

 A method of sales distribution
 A product or brand
 A business idea

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  A strategic option, such as entering a new market or launching a new product
 A opportunity to make an acquisition
 A potential partnership
 Changing a supplier
 Outsourcing a service, activity or resource
 Project planning and project management
 An investment opportunity
 Personal financial planning
 Personal career development - direction, choice, change, etc.
 Education and qualifications planning and decision-making
 Life-change - downshifting, relocation,
 Relationships, perhaps even family planning?

5.1.4 The elements of a SWOT analysis:

A SWOT analysis is a common strategic business planning tool that involves composing a list of
four elements related to a new business project: strengths, weaknesses, opportunities and threats.

Strengths:

In a SWOT analysis, strengths describe the core competencies of a business, strategic factors that
may make a certain project more likely to succeed and areas where the business may have
advantages over other similar businesses. Strengths are resources and capabilities that can be
used for competitive advantage. For example, if an established cereal company plans to launch a
new product, brand recognition might be listed as strength. Examples of strengths that are often
cited include:

 Strong brand names

 Good reputation
 Cost advantages of proprietary
 Proprietary technology / Patents
 Consistent / growing revenue streams
 Strong customer base across multiple vertical industries
 Experienced Management Team
 Financial Resources / investor relationships
 Strong brand awareness in the marketplace
 Partnerships with industry leaders
 Refined operations process
 Strong company culture

Businesses that are aware of their strengths are better able to improve and exploit them to their
advantage.

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Weaknesses:

Weaknesses are things that can make a certain project less likely to succeed and areas where a
company is particularly lacking. Weaknesses can derail a project before it even begins. For
instance, a brand new company might be unknown to most consumers; low brand recognition
and lack of customer loyalty could be weaknesses. Other Weaknesses include:

 Weak brand name

 Poor reputation
 Ineffective and high cost structure etc.
 Poor financial position (debt, declining revenue, etc.)
 Unskilled workforce in critical areas
 Unfavorable perception of brand in marketplace
 No proprietary technology / patents in critical areas
 Out of date equipment / machinery / technology
 High costs of doing business
 Poor location for access to customers / partners / talent
 Scalability issues with core products / services
 Poor relationships with customers
 Unresolved litigation, other legal issues

Once weaknesses are identified, a business takes steps to lessen the impact or turn them into
strengths.

Opportunities:

Opportunities are things that have the potential to increase profits, productivity or benefit a
business in some other way. These factors could involve vendors who wish to work with the
company to help achieve success, the positive perception of the company by the general public,
and market conditions that could make the project desirable to the a segment of the market.
Additional Opportunities include:

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  Arrival of new technology
 Unfulfilled customer needs
 Taking business courses (training)
 New technology in development / beta testing
 New markets for existing products
 Partner product bundles
 Partner co-marketing
 Access to skilled workforce
 Competitors facing problems (bankruptcy, lawsuits, etc.)
 New sales tools to penetrate existing markets
 Diversification into new markets with new products
 International distribution partnerships
 Favorable impacts of new legislation

Recognizing and taking advantage of opportunities are important aspects of running a successful
business.

Threats:

Threats are the final element of a SWOT analysis; they have the potential to harm a business. For
instance, if you run the only pizza shop in town, the possibility that a new competitor will open a
shop and take some of your business is a threat. Unfavorable changes to laws, higher taxes and
changes in consumer preferences other possible threats. Some other threats include:

 Trend changes
 New regulations
 New substitute products
 Competitors getting stronger
 Market trends moving away from core products
 Pressure from supply chain squeezing margins
 Rising costs of doing business
 Consumer ability to shift to substitute products
 Slow market growth / decline in market size
 Change in customer needs
 Key employees leave (to competitors, family reasons, etc.)
 Threat of lawsuits (employees, customers, partners)
 Local economic / political climate inhibiting growth

Identifying a threat helps the business manager to limit its impact of risk.

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5.2 SWOT Analysis: Perspective of Cath Kidston Limited

Observing different aspects of Cath Kidston Limited we have performed SWOT analysis of Cath
Kidston Limited. While performing SWOT analysis we detected various strengths, weakness,
opportunities and threats in the perspective of Cath Kidston Limited.

 Strengths :
1. Strong customer equity
2. Strong brand equity
3. Better customer service
4. Strong supply chain management
5. Large number of shops
6. Unique product design

Explanation:

Cath Kidston is focusing on creating value for customer and adopting customer-value added
pricing strategy that increases the customer life time value. The result of customer life time value
is customer equity.

Cath Kidston is one of the brands that is confident in its design style and fun in its character. As
result we confer that it has strong brand equity.

Cath Kidston limited always serves better customer service compared to its competitors.

Cath Kidston has active management of supply chain activities to maximize customer value and
achieve a sustainable competitive advantage. So we confer that it has strong supply chain
management.

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Cath Kidston has large number of products compared to its competitor.

Cath Kidston‘s unique strength is the product design offers its customer strong personal
statement and identify that other competitors found hard to achieve.

 Weakness:
1. High price
2. More product extension
3. Less customer interaction
4. High cost of regional business operation
5. Narrow and limited product offer

Explanation:

Cath kidston‘s product price is very high compared its competitors.

As the company is extending its product line and deemed not be specializing any particular
product . So it should not extend its product line.

Cath Kidston‘s has less direct customer interaction because of web based business driven
operation.

The costs of maintaining the regional operations ultimately fall on the customers themselves.
That means that the customers need to pay highly for the products also for the reason that is not
relevant to them.

Comparing to other competitors of the same types of product categories, Cath Kidston provides
more differentiated but lower product categories that is limited.

 Opportunities:
1. Opportunity of global extending
2. Opportunity of Business to Business network
3. Opportunity of more product offering

Explanation:

At this moment Cath Kidston limited operates its business in several countries but it has great
opportunity to extend its business globally.

Now Cath Kidston limited operates its business in the consumer market but it has opportunity to
enter the business market.

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Comparing to other competitors of the same types of product categories, Cath Kidston provides
more differentiated but lower product categories that is limited. So we can say that Cath Kidston
limited has great opportunity to offer more product categories.

 Threats:

1. Threat of business loss.

2. Threat of losing loyal customer.
3. Threat of counterfeit.

Explanation:

The biggest challenge of Cath Kidston limited brand is to continue its success with the traditional
English country style and fun brand character.

The product category of Cath Kidston limited is limited with higher price. For this reason it has
the possibility of losing his loyal customers as they will switch to the competitors offering the
same quality product.

As Cath Kidston uses value-based pricing, so the company have to change their designs
regularly. Otherwise the competitors will duplicate their product.

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Chapter 06

Problem Statement

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Cath Kidston is a highly profiled one UK-based company that sells the its product over lots of
areas covering UK, Europe and Asia regions.

In this part of the study, the problems of the case have been briefly stated in this chapter

6.1 Brief Problem Statement Analysis

The problems or the challenges that Cath Kidston are facing are given hereby with relevant
justification:

1. Higher Price:

Cath Kidston is providing with its customers with very high price comparing to other selling
brands. For example, Monsoon and Mark & Spencer provide competitive products in lower
price than that of Cath Kidston in clothing. Aso in case of other product categories, it
provides very higher price losing the lower middle and poor class customers.

2. Product Offerings being Relatively Narrow and Limited:

Comparing to other brands of the same types of product categories, Cath Kidston provides
more differentiated but lower product categories that is limited.

3. Contradiction between Value and Price:

Sometimes, it becomes highly difficult to the consumers to escape themselves from the
hesitation whether they should go for higher value in higher price or lower value in lower
price. As it was a time for recession, the consumers should have been given an opportunity to
get the both opportunity of higher value in lower price on the same footing.

4. More Customer Interactions:

Much stronger websites, billboards and ultimately more consumer interactions with
consumers were necessary to build up a strong customer relationship. This would not only
retain the loyal customers but also retain the older and the probable ones.

5. Easily to Compare:

When it becomes easy for other seelers of the same brands to market the same product, it is
mandatory to keep the strongest differentiation between the products. So, the products should
not be easily to compare.

6. Availability is Essential:

The demand of the product is not always everything to enhance the price artificially on the
basis of the value any company delivers to its products. So, the supply and demand should
have a reasonable equilibrium in which it will maximize the profit on the same footing of
much customer satisfaction.
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 7. Cost of Regional business operations:

The costs of maintaining the regional operations ultimately fall on the customers themselves.
That means that the customers need to pay highly for the products also for the reason that is
not relevant to them.

So, from the analysis of the above statements we can conclude Part 1 that, though Cath
Kidston is successful in maintain its business, but still the solutions of these problems
referring to the problem statement may solve the present and future problems.

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Chapter 07
Solutions to the Problems and Arising Questions
from the Case

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Cath Kidston is almost on the way but still the suspense whether it can be successful in the long
run or not prevails in the case and encourages us to determine the alternative steps that can be
taken to sustainably eliminate the problems. In the recommendation part, the bottom-line
solutions are given and in this part the solutions arising out of the questions have been discussed.

In this part, the problems of the case are going to be discussed in a brief way by discussing on
the basis of the questions given in the case.

Question no: 1

Does Cath Kidston‘s pricing strategy truly differentiate from the competition?

Answer:

Of course, Cath Kidston‘s pricing strategy is different from that of the competitors‘. Because
Cath Kidston follows Customer value-based pricing strategy where the other competitors follow
the cost based pricing strategy.

Here, we can see that customer value-based pricing is something that determines customer needs
and perceptions, determine prices on the basis of that value. And ultimately design products to
cater to the customer needs and satisfaction by determining costs that can be incurred.

By following Value-Based Pricing, Cath Kidston has differentiated itself in the following ways:

 Cath Kidson has become able to do Upward Stretching by targeting the upper level
consumers of the market.
 Cath Kidston can enhance its value of the products it sells to the customers as it charges
more from the customers.
 Cath Kidston can enhance its product lines by investing more in the product innovations.\
 Also, it can make its product more unique as the company‘s products run the risk to be
forfeited.
 At last, the brand loyalty can be ensured by separate pricing strategy as discussed above.

As Cath Kidston follows value-based pricing strategy, so, it can provide more customer value on
the same footing of more price for producing the value in the product.

Thus, Cath Kidston‘s pricing strategy truly differentiates it from other competiotors.

Question no: 2

How Cath Kidston executed value-based pricing, cost-based pricing, or competition-based

pricing?

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Answer:

Cath Kidston executed mainly value-based pricing. But also it executed some other pricing
strategies partially like cost-based pricing, and competition-based pricing.

The way of following cost based pricing strategy

Cath Kidston used to maintain cost-based pricing by reducing the prices of some of the minor
products it sells. It also adds that Cath Kidston used such pricing strategies only in case of the
middle class consumers beliving both in the value and price of the product as well.

Design a good Determine Set price based kn Convince buyers of

product product costs costs product value

Figure 7.1: Cost-Based Pricing strategy

The way of following competition based pricing strategy

To compete with the Cath Kidston somewhat changed its pricing strategies to adapt to its
competitors. In case of home accessories, it followed Competition-Based Pricing Strategy to a bit
extent. It also followed partly the same strategy in case of clothing category. It used to set its
price based on the competitors‘ strategies, price and their market offering to make its product
much more unique and differentiated.

The way of following value based pricing strategy

Cath Kidston followed the value-based pricing mostly. It means that Cath Kidston at first sets
price basing on the buyers‘ perceptions of value rather than on the sellers‘ costs.

Assess customer Set target price to Determine costs Design product to

needs and value match customer that can be deliver desired
perceptions perceived value incurred value at target
price

Figure 7.2: Customer Value-Based Pricing

Here, we can see that Cath Kidston is supplying its products in a higher price on the same
footing of the value it provides.

This is the Customer Value-Based pricing Strategy that has been discussed to be the way in
which Cath Kidston serves to the customers mostly.

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Question no: 3

Could Cath Kidson have been successful as a design-focused product marketer had it employed a
low-price strategy? Explain.

Answer:

According to the study, it can be assumed that Cath Kidston couldn‘t have been successful as a
designed focused product marketer on the same footing of supplying in low price. The reasons
backing our opinion are given below:

As the Research and Development sector of Cath Kidston needs sufficient finance to
make and implement the research and development activities, so it can incur loss by low
pricing.
Again, there are a group of people called upper level consumers who believe in the
value and price both increasing in the simultaneous mode of increasing their social status
by using high priced product who can be disheartened by the low price of the product.
Again, in case of downward stretching, of course the company must be successful in
upward stretching as it serves the higher middle and higher class people.
The company must add value to the product to a great extent to be the market leader for
what low-price strategy cannot be implemented.
Ultimately ensuring more for less, is normally done in the very inception of the product
Life Cycle. So, it will be worth fruitless to implement the retro effect for the company.

So, these are the reasons backing the idea that Cath Kidston couldn‘t have been successful as
a design-focused product marketer had it employed low-price strategy.

Question no: 4

Is Cath Kidston‘s pricing strategy sustainable? Explain.

Answer:

According to the study of the case, we can assume that Cath Kidston‘s pricing strategy is not
sustainable. The reasons backing our opinion are given below:

As in the time of recession, only on the basis of the customer value, the pricing strategy
of Cath Kidston may breakdown after a certain period.
Marketing Myopia may affect the company to a great extent as the company only
believes in its value but not on the affordability and taking no steps in reducing the price.
Price Discrimination is not done by the company. It means that the company doesn‘t do
any lower price offering to the lower middle and middle class people.
Downward stretching is not becoming possible to implement that may create great
hindrance to the company to sustain its pricing strategy in the log run.

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 Ultimately the market share of the company may be grasped in the future that will cause
the company dissolve its reputation and product loyalty.

So, these are the reasons for Cath Kidston‘s pricing strategy not being sustainable for the long
run.

This is the end of the solution of the problems and questions of the company on accordance with
the case and our information based on the case.

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Chapter 08

Recommendation

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With the advent of pricing tools it is becoming tougher for various marketers to win over the
customers in their pricing strategy. This is how some problems have been identified in Cath
Kidston‘s pricing strategy though it was a successful price taker comparing with other
competitors.

Observing the problems, some possible recommendations to solve the problems have been given
below:

1) Providing with lower prices :

As Cath Kidston, due to the its higher prices, is losing its lower middle and poor class
customers, it should lower its product prices to some extent, For this it should redesign its
pricing strategy and introduce some low quality products especially for lower middle and
poor class customer.

2) Offering incentives:

Cath Kidstone‘s product prices are high as they offer superior value comparing with other
competitors. But the lower middle and poor class‘s customers are unable to bear this high
prices, In this case the company can offer discounts like quantity discounts, seasonal
discounts, cash discounts etc.

3) Diversified product offerings:

Presently Cath Kidston is offering more differentiated products but only in limited numbers.
So to sustain its market image and to make more market coverage it should offer more
quality products.

4) Maintaining value based pricing strategy:

In times of recession the customers were indirectly deprived of having greater value with
their low prices. Though it was not easy for a company for offering quality products with
lower prices it should had taken some schemes to hold the customer loyalty.

5) Improved customer interactions:

Though Cath Kidston‘s main success was in pricing strategy it lacks some better customer
interactions. It should launch more online marketing, word mouth marketing, buzz
marketing, billboards etc.

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 6) More differentiation:

As market is highly competitive it is not enough only offering differentiated products.

Differentiated should be more diversified and in greater number so that it can cover more
possible customers in the market.

7) Product availability:

It is very crucial to maintain demand and supply equilibrium in the market otherwise it
creates dissatisfaction among customers and loses some loyal customers. Consequently the
competitors will enjoy the competitive advantage.

8) Maintaining equality between cost and prices everywhere:

As Cath Kidstone is operating its business outside in UK, it should balance the costs and
prices as well as product quality.

9) Unique selling proposition:

Cath Kidstone should fix some unique selling proposition that will create more customer
attraction to their products. It will give some competitive advantages.

10) Market research and customer survey:

For future market sustainability Cath Kidstone should conduct regular and effective market
research to discover customer insights as well as should maintain a regular customer survey
to check out the popularity.

So, the recommendations stated above can be followed to solve the problems. Thus it would
be successful to maintain balance between price and customer value.

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Conclusion
Companies today face a fierce and fast-changing pricing environment. Firms successful at
creating customer value with the other marketing mix activities must still capture some of this
value in the prices they earn. The UK based business giant, Cath Kidston was pretty much
successful in their pricing strategy during their business tenure it has experienced so far. It offers
differentiated and superior value to its customers. Through its qualified products in different area
in the world it is now a well known brand name to the most of the customers in the specific
regions .But as we know in the present context of highly competitive market it is hard nut to
crack to hold the customer loyalty for permanently. And Cath Kidston was no different from this
phenomenon. After a thorough analysis of Cath Kidston Company like SWOT analysis, Pestle
analysis, Porter‘s five factor analysissome problems have been identified in their marketing and
pricing strategy. The competitors are catching their customer loyalty for this lope holes.
Considering the problems we have recommended some ways to fight against the price war.

Following the recommendations Cath Kidston can sustain its market coverage and customer
loyalty as well.

Bibliography
References:
 Kotler, Armstrong. Principles of Marketing, U,S. Pearson (15th Edition)

Websites:
 http://en.wikipedia.org/wiki/PEST_analysis
 http://pestleanalysis.com/pest-analysis/
 http://university-essays.tripod.com/porters_5_forces_analysis.html
 http://www.bbc.co.uk/news/business-17836624
 http://www.bankofengland.co.uk/publicatio…/news/2010/084.htm
 https://www.cia.gov/…/publi…/the-world-factbook/geos/uk.html
 http://www.theretailbulletin.com/…/its_time_for_retailers_…/
 http://www.guardian.co.uk/…/2010/jan/20/schools-more-diverse
 http://www.telegraph.co.uk/…/Budget-2012-Corporation-tax-cu…

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