Corporate Strategy Presentation

Rahul Arora – 17PGDM209

Vishal Bansal - 17PGDM239
Company Overview

1998 Founded as Wholesale Distributor in Los Angeles

2003 Opened first retail store in Los Angeles

2004 Launched E-commerce website

2004 Opened 34 stores in North America & 3 in UK

2005 Became Largest garment manufacturer in US

2007 Listed in New York Stock Exchange

2010 Reported highest net loss in company history

2012 Made a comeback & became one of leading suppliers of T-

shirts to US market

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 Production

Vertically Integrated Biggest Facility Employee Relations Speed & Flexibility

All Operations done in
Downtown Los Angeles Factory
• “Made in USA”
• Use high quality fabrics
• 800,000 square feet of floor
space
• Dyeing & finishing were at
separate facilities
• Approx. 3000 employees
were involved in operations
• Fare wages & benefits for
employees
• “Sweatshop Free”
• Lowest paid worker earn
double than minimum wage
• It takes only two weeks for
design to go from design
concept to store racks

Transported to finishing Inspected and Quality control personnel

Purchased yarn is sent to Knitted fabric is sewed into
facilities and other inspect finished garments
knitters bleached and dyed finished 3
committed dye houses for defects, if any
garments
 Products & Product Design

Wide Range of
Products In house staff of designers and creative professionals

• For men, women,

Each member was hired by Dov Charney based on “eye for what’s next”
children, babies, pets
• Clothing, hosiery,
shoes, bags, He personally lead the team and approved all designs

accessories
Inspiration from emerging style trends among youth living in LA, London
• Wide range of colors & New York

• Style : Simple basics

mixed with retro Developed “updated versions of timeless, iconic styles”

inspired pieces
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 Distribution

Retail E-Commerce Wholesale

• 249 stores worldwide • Americanapparel.com • Operates from Los
• Locations in 20 countries • Operating since 2004 Angeles Headquarters
• 2500-3000 square feet • Localized websites for through call center
of selling space US, Canada, UK, Europe, • About dozen authorised
• Located in large Switzerland, Japan, distributors and over
metropolitan areas, South Korea, Australia, 10000 screen printers
emerging Mexico & Brazil • Fast turnaround of
neighbourhoods and orders
university communities • Orders received before
6:30 p.m. shipped on the
same day

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Target Markets

Young Urbanites
• Aged 20 to 32
• Progressive Thinkers
• Full-figured
• Culturally Sophisticated
• Creative, Independent-minded
• Tech-savvy
• Fashion Conscious
• Shop online
• Looking for well designed , high quality
fashion essentials

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 Competitors

Wholesale Competitors Retail Competitors

• Hanes • GAP
• Fruit of the Loom • H&M
• Gildan Activewear • Forever 21
• Russel Athletics • Urban Outfitters
• American Eagle

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 SWOT Analysis

Strength Weakness Opportunities Threats

• Vertical Integration • High fixed costs • E-commerce • High level of global

• “Made in USA” • Negative brand • Return to “basic” competition
• Sweatshop free perception apparel • Costs of raw material
• String supplier of • Provocative advertising • International increasing
relationships • Financial restrictions Expansion • Economic market
• Product quality • Rapid store expansions • Change brand trends
• Company owned • Leadership perception • Government
manufacturing facilities • Improve inventory regulations
• Speed to market management
• Improve financial
margins

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 Marketing & Social Responsibility

Strategy • In house Marketing Strategy

• Striking Advertisements
Advertisements
• More like facebook photos rather than ads

• Some images were banned by Britain Advertising Standards for

Objectionable content
being sexually suggestive

• Advertised mainly on online sites & alternative newspapers,

Media
avoiding mainstream media

• Hired employees from Homeboy industries to support free trade

Hiring
and immigrant rights

• “Made in USA” and “Sweatshop free” credentials as a part of their

Message
advertising messages
Environmental
• Sustainable Edition organic cotton line
Friendly
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 Managing Turnaround 2010-2012

Senior Management .
• Marty staff, Thomas Casey and John Lutterell were appointed in June 2011 on senior positions
• 2 of them left within a year

Store closure .
• No. of stores worldwide reduced from 281 to 249 after their review of performance and prospects

Refinancing .
• To restore their liquidity position, they borrowed $80 million from Crystal Finance at 9% above LIBOR
• Raising $21.7 million from issuing common stock

Cost cutting
• Reduced corporate expenses, improving merchandizing and rationalizing staffing levels

Increase in sales
• Initiative taken to expand its wholesale business to increase sales
• Increased promotional offers, especially through groupon
• By improving website, their net sales increased by 14.5% to $24.3 million 10
 Difficulties & Risk

Competitors developing clone products at lower price offerings

Plus size clothing line fails to generate additional revenues

Financial burden of labor expenses

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 Future Outlook

Financial condition became much more stable by spring 2012

Continued its vertical integration to expand its retail footprint

Wanted to promote Urban cool but was it globally scalable?

With broadening product range, there was more complexity in all of its operations

Enforced pause in expansion helped in strengthening its aspects

But still there is a doubt in effectiveness of its strategy of international expansion because Dov Charney was the key
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 Recommendation

• Reposition American Apparel as premier fashion

Revamp Brand Image • Highlight basic fashion pieces not the models

• Increase digital advertising

Increase E-Commerce • Offer some products as online only sale

• Associate with fashion bloggers to increase awareness

Fashion Blogs & Vlogs • Offer American apparel merchandise to use in posts

• Discontinue underperforming product lines

Inventory Controls • Improve forecasts
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Thank You