A Prelude To Our Final Presentation!

Here'a a snapshot of our brand journey with Hang Ten from Day 1 to now. We've come a long way, from the preliminary brand audit to conducting in-depth qualitative and quantitative market research to investigate the tactical and strategic gaps of Hang Ten. Then we put our creative heads together and came up with a marketing campaign that address the brand challenges. After which, we put on our financial caps to derive brand valuation. Lastly, we went a step further to analyze the different growth strategies that could be a great competitive advantage for Hang Ten in the years to come.

It's been a wonderful brand journey, and we hope you're as psyched as we are for our final presentation. Enjoy :)

Assignment 6: Introduction and Core Competencies of Hang Ten

In our final Hang Ten brand assignment, we explore the potential growth strategies of Hang Ten which they can choose to adopt in the future. We define the future in our context as 5 years on after the implementation of our recommended marketing plan in Assignment 4.

In order to better examine potential growth strategies of Hang Ten, it is important to set our foundation proper and determine Hang Ten’s core competencies which can be leveraged on.

Core competencies are strengths and selling points which are unique to a particular brand and help to provide added value to consumers.

We identified the following core competencies:

1)      Value-for-money

Armed with a cost efficient production and supply chain system, Hang Ten is able to be one of the most price competitive casual apparel retailers in the industry and offers great value-for-money for their consumers.

2)      Widely available and accessible

Hang Ten has a whopping 750 stores worldwide which provides themselves with an expansive network of company-owned stores to boost direct distribution to their consumers all over the world. They have the capability to reach out to a wide array of markets and consumers and this could be a valuable arsenal which could be leveraged upon.

3)      Understanding of Asian pop culture & values

a.       Performing well in Korean and Hong Kong market

Hang Ten has a strong presence in Asia and this region is also the most successful and profitable region in Hang Ten’s portfolio. Hang Ten is doing especially well in Korea and Hong Kong where trendy collections, popular celebrity endorsements, well-designed company-owned outlets along with generous investments in media collaterals have successfully promoted Hang Ten amongst its target segment, boosting a positive brand image amongst youths.

b.    Designers are based in Korea and Hong Kong

Most of Hang Ten’s product designers are based in Korea and Hong Kong, which are considered the up-and-coming fashion capitals amongst youths. Korean culture and fashion is also increasingly popular in Singapore, hence, if Hang Ten is able to leverage on their existing knowledge of fashion trends in Korea and Hong Kong and apply this knowledge to redesign the product range in Singapore, Hang Ten might be able to enhance consumers’ perceptions of the brand.

With a better idea of Hang Ten’s core competencies, we can use this as a starting ground to help us better brainstorm and structure the potential growth strategies for Hang Ten in our next few entries.

Exploring Possible Growth Strategies

Moving forward, Hang Ten needs to focus on strategies for future growth and sustainability. We first consider sources of growth for Hang Ten in either current or new markets and/or products before showing our recommendations.

1) Capitalizing on the Hang Ten parent brand for future brand extensions

Brand extension occurs when a firm uses an established brand name to introduce a new product, including line and category extension.

Line extension applies the parent brand, Hang Ten, to a new product that targets a new market segment within a product category the parent brand currently serves

• Casual surfwear for teenage market
• Apparel for kids
• Smart casual and formal for the trendy, working crowd

Category extension applies the parent brand, Hang Ten, to enter a different product category from the one it currently serves

• Intimate wear for men and women
• Shoes, bags & accessories for young, trendy fashionistas

The advantages of brand extensions

Brand extensions are crucial for Hang Ten’s future. It facilitates new product introduction and acceptance from consumers. For example, if Hang Ten were to enter the intimate wear market under the established parent brand name, customers are more likely to accept it and perceived risk is reduced. It also increases efficiency and reduces costs of marketing programmes since consumers are already familiar with the brand name.

In addition, brand extensions can also provide positive feedback to the parent brand by broadening brand meaning and salience. For example, if Hang Ten ventured into the shoes, bags and accessories market, the brand meaning could widen from “casual, comfortable apparel” to “for all casual occasion needs”. This in turn attracts new customers and increases market coverage. If executed effectively, brand extensions can also revitalize and renew interest the parent brand.

2) Expanding the Group through strategic acquisitions

Acquiring new businesses entails the purchase of shares or assets of a corporation by Hang Ten Group.

Hang Ten could acquire either related businesses in the apparel industry or a completely unrelated business for greater business diversification. For example, the Group could acquire close competitor Bossini to drive down competition, achieve synergies in their operations or tap on developed distribution channels to increase market share. Alternatively, the Group could acquire successful restaurant chain, Thai Express, to snap a stake of the highly lucrative F&B industry.

The advantages of acquisitions

Strategic acquisition significantly reduces costs of entering the market and provides fast access to existing resources and expertise. However, before this is done, besides analyzing whether the acquisition is in line with the Group’s strategic direction, the financing options, asset valuation and effects on management and culture must also be considered to outweigh the costs and benefits.

Acquisitions is not recommended

Given the Group’s strategic imperative in establishing itself in the apparel industry, it is unlikely that management will perform dissimilar acquisitions as this deviates from its long-term vision. Acquiring current competitors might prove to be too costly and cumbersome as Hang Ten’s competitors are relatively large.

3) Riding on Hang Ten’s current regionalization to reap the benefits of internationalization

Hang Ten Singapore is under the direction of the Group headquartered in Hong Kong, making it a regional brand with strong presence in South Korea and Taiwan. Due to Hang Ten’s unique licensing structure, the Group manages Hang Ten in South East Asia, while Hang Ten USA is a separate entity.

Internationalization strategy is not recommended

Although it is not within our team’s capacity to recommend an internationalization strategy for Hang Ten Singapore or the Group, we recognize the advantages of developing global marketing programmes that contribute to economies of scale in production and distribution, reduced marketing costs and building a consistent, reliable and recognizable international brand image that reconciles all levels of the CBBE to achieve strong brand resonance. Thus, we will inject the concept of a global marketing programme to our growth recommendations so that Hang Ten can capture the benefits of a unified, regional branding.

Now that we have rejected options 2 and 3, the next entry examines different types of brand extension strategies we can adopt.E

Evaluation of Options

Having learnt about the possible growth strategies of Hang Ten, we now move on to evaluate and assess its attractiveness in serving the options.

According to Ansoff’s Growth Share Matrix, we see the four options that Hang Ten could consider in developing its future growth strategies. 

Rejected Options

In line with Hang Ten Holding’s current growth strategy, it is unlikely for Hang Ten to expand into other markets as there are still much potential in the current markets that is not being reaped. Also, although existing products can future penetrate existing customer markets are push into additional ones, new product introductions are often vital to the long-run success of a firm

It is unlikely for Hang Ten to delve into market development, because the parent company already has other brands under its belt that caters to them- for example, Arnold Palmer (under the same parent company) is a brand that targets older men.  We will not want to risk conflict of interests with brands under the same parent company.

Therefore, we can rule out the possibility of market penetration or market development in the next 5 years.

Possible Options

In product development, the line extension options of launching kids apparel and targeting fashionable young people with the smart casual and formal wear will allow Hang Ten to leverage on existing knowledge of its counterparts in other countries such as Hang Ten Korea, where the product line is known for being more trendy.

Diversifications into a new market with new product- category extensions such as launching more products under the brand name- such as developing a new accessories line that will complement the current product range offerings. Other options of line extension include delving into surf wear and intimate clothing. However, we feel that these options might not be feasible because there might not be a demand from Hang Ten’s current target consumers for the line extensions.

Evaluation

Some of the advantages that Hang Ten can reap from the brand extensions are improving its brand image, provide consumers with more variety, and avoid cost of developing a new brand, as well as increase efficiency of promotional expenditure, where the company will only need to focus its promotional activities on promoting the new product.

Hence, we are looking into formulating growth strategies with brand extensions, targeting existing markets and new markets.  Look out for the next entry, where we will elaborate more on the selected plans!

Product Development

The first strategy we see Hang Ten executing in the next 5 years will be introducing new products but aimed at the current market. We suggest doing so by expanding their current product line to include accessories and other clothing-related items relevant to the target segment. This will make Hang Ten a lifestyle brand as opposed to an affordable casual clothing company.

Product Line Expansion

The types of products that we see Hang Ten adding to their line of offerings include bags, rings necklaces. These accessories should be introduced seasonally with each season carrying a different theme. Below are a few themes we propose Hang Ten use.

The Beach Bum

Hang Ten should start a beach themed collection. This theme is likely to be well-received in Singapore as we are an island with a number of beaches that youths and young adults like to frequent. Thus, riding on the beach-trend wave (pun intended) will help Hang Ten target this segment of the chic beach-goer. This will also be a wise move for Hang Ten as it is consistent with their image in the US and they already have clothing and accessories in this theme. It will thus be easier for Hang Ten to get access to the products and collections in this line. The specific types of items featured in the "beach bum" series includes limited edition Hang Ten board shorts, bikinis and accessories using shell, straw and pearls.

Funky Town

Hang Ten could also introduce an accessory line using psychedelic colours. Psychedelic colours have a cool, youthful and vibrant vibe that could attract youthful fashionistas who are not afraid to wear bold accessories and loud colours. This line could help Hang Ten draw in the segment they are targeting and differentiate them from competitors, Giordano & Bossini, who have yet to expand into such offerings, hence providing Hang Ten a strong first-mover advantage and uniqueness.

Diversification into Korean Style

Within the next 5 years, Hang Ten can consider bringing the H&T sub-brand they currently have in Korea to Singapore as their second growth strategy following the previous implementation of their product extensions. Considering the fact that Hang Ten’s core competency is based on an understanding of “the Asian style”, we believe that introducing H&T to the Singapore market can help Hang Ten capture a broader market and consequently, increase its revenue. Moreover, Hang Ten can also leverage on their existing facilities and capabilities since they can import these new products from Korea without the need of additional manufacturing facilities.

Mode of Entry

The introduction of H&T as a sub-brand is chosen to reduce the transference of Hang Ten’s currently unfavorable brand image to H&T while allowing Hang Ten to partially gain from H&T’s trendier image and popularity among Korean (and, potentially, local) youths.

In entering the Singapore market, H&T should come in force by opening a concept store in a prominent location to signal that it is not simply another fashion label. Given the perceived similarity between its brand and H&M’s, it is even more important that H&T establishes itself strongly during its initial entry to avoid being perceived as a knock-off of the renowned fashion chain. Its launch can be timed to coincide with the performance of a popular Korean artist in Singapore, or even feature a fan-meet by the artistes themselves.

While this is expected to incur sizeable costs, Hang Ten Group Holding’s recently-doubled operating profits are undoubtedly able to cover this. Considering higher potential returns from a new market penetration as compared to further expanding Singapore’s faltering Hang Ten brand, this may in fact be a more prudent alternative.

H&T brand analysis

Target Market : Fashionable, young (18-25 years old) individuals that are knowledgeable and involved in popular culture. They also tend to be less price conscious and value style.

Price: The price point for H&T will be slightly higher than Hang Ten’s current products to impart an upscale image and convey higher product quality; both in material and design.

Product: H&T currently offers Korean fashionable products, relatable to the current fad about K-pop and Korean dramas. In place of Hang Ten’s emphasis on basic casual apparel, H&T focuses more on smart casual clothes consumers often wear to hang-out and for nights out.

Being more trend-oriented and fashionable, H&T’s offerings will not cannibalise on Hang Ten’s products, but rather supplement them in other usage situations and purchase considerations, widening brand salience. A wider range of products is also offered by H&T, including accessories, footwear, knits and jeans.

Place: Rather than expanding into heartland malls like Hang Ten did, H&T retail stores will be opened in higher-end malls (e.g. ION Orchard, Somerset 313, VivoCity, Citylink etc.). H&T products will also be made available for online-shopping on a new, dedicated H&T Singapore website.

Promotion: As in Korea, H&T will rely heavily on celebrity endorsement. Korean celebrities, for one, are highly popular in Singapore, and many often hold music performances here. Idolised girl-band SNSD, singers Jay Park, se7en, Kim Hyunjoong (also currently a H&T brand-ambassador) and actor Jang Geun Suk have all recently made tours to Singapore.

To further reinforce the link between H&T and stylish Korean popular fashion, H&T can sponsor the performances of artists who endorsed H&T products, or K-pop artists in general (e.g. through K-Pop Asia, a dedicated community for K-Pop Korean pop-culture appreciation). Advertisements in fashion magazines and outdoor media around shopping and lifestyle hotspots such as Orchard Road and Clarke Quay are also viable to further increase visibility.

Challenges to growth

Competitors: 

By placing its products in the smart-casual segment with higher prices, H&T comes face-to-face with renowned fashion retailers such as H&M, Forever21 and Topshop, all of which have a strong presence and regional flagship stores in Singapore.

While competition is predicted to be stiff, H&T has an edge over its Western-oriented competitors by offering Korean-style products which none of them carry. This “Asian style” advantage, combined with the current hype about all things Korean, can strongly support H&T’s initial market penetration.

Reliance on fads: 

Despite its current popularity, the Korean fad may overtime decline, just as previous hypes about Taiwanese and Japanese dramas have come and gone. Lasting an average of not more than 5 years, the eventual decline in the popularity of Korean pop-culture and fashion can and will adversely impact H&T’s performance if it fails to capture a sizeable market within this period or keep up-to-date with upcoming fashion trends.

While the former can be addressed by its time and mode of entry and subsequent marketing program, the latter requires H&T to offer more than just celebrity endorsements. To retain customers once the Korean fad has fizzled out, therefore, H&T needs to simultaneously emphasize its product’s quality while continuously updating and expanding its collection to include styles popular in the region (esp. those of major fashion-hubs such as Taiwan, Japan and Hong Kong), as opposed to those popular only in Korea.

Introduction to Assignment 5

Assignment 5 aims to identify the economic value of the Hang Ten brand to the business by measuring the extent to which the brand helps to drive sales in the respective market segments.

To gain a complete understanding of the brand's value, we employed a 5-stage valuation process. These are:

Stage 1: Identify Hang Ten Singapore's consumer segments based on current sales contribution.

Stage 2: Estimate each segment's expected growth in the near future based on the proposed changes in Hang Ten's marketing program, described in Assignment 4.

Stage 3: Determine how much each segment's purchase decisions are affected by brand-name (as compared to other factors such as price) using the RBI (role-of-branding index) measure.

Stage 4: Evaluate Hang Ten's brand strength through the Brand Strength Analysis to calculate the discount rate on the Hang Ten brand.

Stage 5: Based on each segment's size, expected growth, RBI and Hang Ten's discount rate, we finally calculate future brand earnings per consumer segment, which gives us Hang Ten's current brand value.

Follow the links above to find out Hang Ten's current brand value!

Stage 1: NOPAT & % of Sales by Segment

In stage 1 of the brand valuation process, there are two key pieces of information that we derived, the Net Operating Profits After Taxes (NOPAT) and the percentage of sales by segment. These numbers form the basis of calculating Hang Ten's financial value.  

NOPAT

Hang Ten's NOPAT was taken from Hang Ten Group Holdings Limited Annual Report 2011 at SGD 2 276 820 (HKD 12.6 million).

% of Sales by Segment

Four key segments were identified as seen in the table. Identifying these segments were a result of both the quantitative and observatory research conducted by our team over the course of the past few assignments. From this research we uncovered the interests and motivations of these different groups as well as their buying pattern in-store. Subsequently, we extrapolated these consumption patterns into % of sales estimation.

Price-conscious individuals: This group formed the highest sales segment. Based on observatory research they were the group most seen in Hang Ten stores and this was no surprise as their motivations match Hang Tens promotion strategy.

Working adults who value simplicity and comfort: The second highest sales segment was identified based on their appearance and demeanor. They often gravitated to a more expensive collection than the first segment which indicated their higher spending power.

Youths looking for casual apparel: The youth segment is one of the smallest seen in store. Past research as indicated Hang Ten is not a strong brand for them and purchase intentions is dismal.

Events-specific purchases: While the events-specific segment may be smallest in absolute terms, this was due to the minimal number of events supported by Hang Ten. The main event was National Day and Hang Ten experienced note-worthy sales as respondents preferred Hang Ten's simple designs over competitors Giordano and Bossini.

Stage 2: Financial Analysis

Armed with segmentation percentage of sales, we next assess the levels of growth of the different segments after initiating the new and revamped branding and marketing campaign.

Youth & Working Adults segments expected to lead growth

The segments expected to grow the most over the next five years are the youth and working adults segments at 10% and 6% respectively. This is mainly due to the targeted marketing campaign that will change perceptions of Hang Ten as a young, trendy and casual brand for them. The integrated marketing communications will seek to appeal to these segments and thus, improve growth.

Price-conscious & Events-specific segments forecast to grow marginally
On the other hand, the segments expected to grow the least are the price-conscious and events-specific segments at 4% and 2% respectively. As there will be less aggressive marketing pull for the price-conscious individual, we expect growth to slow. We also factor in the possibility of Hang Ten losing some of the segment due to a misalignment between price-conscious expectations and Hang Ten's new image. However, we must also consider the projected organic growth with Singapore's aging population and influx of foreign workers that will still push the segment to experience marginal increase. Event-specific segment is also projected to grow marginally as a result of organic growth in Singapore's population over the next five years.

Hence, using % of sales per segment and respective growth rates, projected sales at the end of the 5th year are estimated at $1.4 million for price-conscious, $800,000 for working adults, $550,000 for youth and $250,000 for events-specific segment.