Sample Business Studies Paper on Vera Bradley’s Strategy

4        Chapter 4: Findings, Discussion and Analysis

4.1        Findings on Vera Bradley’s Strategy

In tandem with this, the researcher relied on diverse theoretical strategic management frameworks. The reliance on solely secondary data was further justified by the fact that Vera Bradley operates on a five-year strategy adopted in 2014 and thus, is not subject to change in the study period. More specifically, Vera Bradley’s strengths and weaknesses were evaluated based on the following frameworks: MBV, RBV, OBV, and IBV. The finding revealed that the Vera Bradley Company is highly committed to increasing its market share, sales, and profitability. In 2014, barely a year after Robert Wallstrom become CEO, the company embraced a new strategic plan that focused on three primary areas: product, distribution channels, and marketing (Turnipseed & Gamble, 2014).

4.1.1       Product

In attempts to attain higher sales volumes and profitability, Vera Bradley leverages on the product diversification strategy. More specifically, the company integrates both concentric and horizontal diversification. According to Huang, Dyerson & Wu (2015), concentric diversification is a strategy whereby a firm manufactures new goods that are closely related to its core business. For instance, Vera Bradley started out as a manufacturer of duffel bags but later introduced other related products including handbags, sports bags, baby clothing, socks, and scarves among others. In horizontal diversification, as Huang, Dyerson & Wu (2015) note, a firm introduces new products that are commercially or technologically not related to the core products. For instance, although Vera Bradley started out as a bag-manufacturing company, it now sells phone and computer covers, jewellery, beach accessories, cosmetics, and home appliances among others. Overall, Vera Bradley has a wide range of products in five primary categories: fashion bag and accessories, travel, campus, wellnesses and beauty, and home (Vera Bradley, 2017).  In each of these segments, Vera Bradley emphasises on pattern innovation, fabric, and newness. Notably, the organisation is committed to leveraging strategic licensing and partnerships to expand its product category.

Given its broad product portfolio, Vera Bradley uses a well-thought-out product development and release strategies. For starters, the company puts great emphasis on bags, which form a core part of its product offering. Vera Bradley has a team of developers who design classic and new styles that align with emerging trends (Vera Bradley, 2017). The organisation uses these bags as channels of visual merchandising. As a result, the development team integrates unique colours, patterns, fabrications, and features in every bag. In order to ensure the novelty of the patterns and other aesthetic features, Vera Bradley not only maintains an internal print design team but also partners with independent designers. Undoubtedly, Vera Bradley uses the open innovation approach, whereby a firm leverages on both internal and external ideas to enhance its competitive advantage (Chesbrough, 2003). The planning and development cycle of new bags take between 12 and 18 months before therelease date (Vera Bradley, 2017).  Notably, the enterprise oversees the all designing and development processes, and later copyrights approved designs.

Every year, Vera Bradley releases ten new collections. Every collection encompasses two or three new designs. Products with poorly selling products are discontinued after the release of new collections (Vera Bradely, 2017). Vera Bradley’s strong emphasis on product novelty is in line with the RBV model that explores a firm’s competitive advantage through its set of rare, valuable, and non-imitable resources (Kraaijenbrink,  Spender, and Groen, 2010). Overall, Vera Bradley’s product strategy leverages on all the RBV factors pinpointed by Kraaijenbrink,  Spender, and Groen, (2010) :human, physical, and organization resources to produce and release unique products.

4.1.2       Distribution Channels

Vera Bradley’s management recognises the importance of a strong infrastructure. Currently, the company has heavily invested in effective supply chain management and IT systems. In attempts to improve efficacy and efficiency, Vera Bradley opted to outsource rather than manufacture the goods in-house. According to Huang, Dyerson, & Wu (2015), outsourcing allows firms to concentrate in their core businesses while at the same time reducing costs of production. A critical analysis shows that Vera Bradley utilises multi-channel manufacturing and distribution systems. Every process in the multi-channelled distribution network integrates sophisticated information technologies systems that enhance accuracy and speed. The organisation has multiple manufacturers, suppliers, and distributors spread across multiple countries. Although there is a substantial number of manufacturers and suppliers in the US and Europe, Vera Bradley sources most of its products from Asia, mainly China and South Korea (Vera Bradley, 2019). Although the organisation has a high number of manufacturers and suppliers at its disposal, it has with time, selected a few that are able to meet its high standards of quality. Lonial & Carter (2015) note that suppliers’ power increase at the expense of a firm when the company has access to few suppliers. The multi-channel sales model focuses on both direct and indirect selling. As of January 2017, the organisation had 113 full-line stores, 46 factory outlets stores, and over 2,600 speciality retail locations (Vera Bradley, 2017). It is important to note that Vera Bradley is keen on opening new company-operated, full-price outlets to complement its indirect channels (Vera Bradley, 2017). Naturally, the high number of direct and indirect outlets have drastically enhanced brand visibility and awareness. Site location and sizes are equally important. Vera Bradley considers the ideal location as one that is spacious and in a densely populated locale. More specifically, the ideal size for a full-price shop is about 1,800 square feet although some of its spaces are larger while others are smaller. It is without a doubt that Vera Bradley’s distribution strategy is in line with the MBV framework, which holds that the source of a firm’s success is its external rather than internal environment (Hewett & Krasnikov, 2016). As Grundy (2006) notes, when competitive rivalry in an industry is extremely high, an organization can attain competitive advantage by identifying and leveraging on areas that they can defeat their competitors. The premium clothing brand has focuses on outdoing its competitors in market-based strategies such as product diversification, outsourcing, global expansion, and using a multi-channelled sales model. As Parnell (2006) acknowledges, as in line with Vera Bradley strategies, market leadership is a strong factor of enhancing competitive advantage.

4.1.3       Marketing

The findings showed that marketing efficiency is a core strategy for Vera Bradley. As the company clarifies on its website, Vera Bradley’s focus is to make the brand relevant, desirable, and enticing enough for customers to purchase (Vera Bradley, 2017). The company greatly focuses on communicating directly to the potential end consumer, who it regards as the Day Maker. The latter, Day Maker, is a term used by Vera Bradley to describe its target aspirational customer. Simply, the word “Day Marker” refers to organised and thoughtful individuals, mainly women, who express their beauty and femininity in print, colour, and thoughtful patterns. It invests heavily in marketing programmes, especially those that target newly released products. An in-depth analysis of Vera Bradley’s marketing strategy shows that the company uses a fully integrated combination of print, experiential, social, and digital platforms to better communicate with potential and existing customers. Vera Bradley’s strong emphasis on enhancing its brand awareness is in line with the IBV model, which stresses the importance of firms leveraging on opportunities presented in local and global markets.  As earlier stated, Vera Bradley focuses on American and Japanese markets.

4.2        Discussion and Analysis

This section focuses on presenting an informative interpretation of the above findings in an attempt to answer the research questions. To restate, the primary objectives of this study is to establish whether Vera Bradley’s current strategy is both effective and efficient. Naturally, an effective and efficient strategy is one that enhances a company’s value and helps increase market share.

After subjecting Vera Bradley’s strategies to multiple frameworks it is apparent that the company struggles with substantial internal and external issues. To restate, the effectiveness and efficacy of the company’s strategies were analysed through the MBV, RBV, OBV and IBV.

Firstly, a critical analysis of Vera Bradley’s internal conditions through the RBV showed that the organisation is unable to efficiently and effectively manage relationships with its suppliers, thus compromising its value and ability to increase its market share. Based on the findings, Vera Bradley relies on various suppliers for raw materials such as authentic and faux leather, microfiber, polyester, and nylon (Vera Bradley, 2017). Although there are multiple suppliers in Asia, where the company outsources often, it has with time come to rely on a few numbers of manufacturers and suppliers, who have proved that they can deliver high quality. Vera Bradley’s high reliance on a few manufacturers and suppliers pose substantial threats to the company’s value chain. If the current suppliers experienced any disruption, Vera Bradley would not be able to locate alternative sources at the expected price and time frames. Furthermore, most of Vera Bradley’s manufacturers and suppliers are in China and South Korea. By virtue of the long distances, the relationship between the company and its partners is weak. While the long distances make it difficult for Vera Bradley to supervise on quality, weak relationships coupled with a lack of long-term contracts means that the suppliers and manufacturers can at any time decide to work with Vera Bradley’s competitors instead.

Vera Bradley’s product development and release strategy are one of the company’s competitive strength. As the collected data indicated, the organisation has both the expertise and the technology resources required to make unique products. The enterprise has an in-house team of qualified and dedicated personnel who ensure that its products, especially bags, integrate features, patterns, and designs that align with fashion trends and emerging consumer demands (Vera Bradley, 2017). Notably, based on the OBV, Vera Bradley’s product development expertise is a major strength. The uniqueness of the products’ aesthetics and designs set Vera Bradley apart from its competitors thus leading to strong customer loyalty. With excellent human and technical resources, Vera Bradley has successfully established itself as a global, authoritative, premium lifestyle brand. Vera Bradley’s model for success is affirmed by Boermans & Roelfsema (2013) who state that a major factor of a company’s competitive advantage is its ability to connect diverse actors needed for production and distribution. Further, multiple scholars add that it is firms’ temporary competitive advantage that later transforms into a sustainable competitive advantage (Huang, Dyerson, and Lu, 2015; Pulaj, Kume & Cipi, 2015).

Secondly, analysis of findings through the MBV show that although Vera Bradley considers its marketing strategy to be core in increasing value and market share, the organisation lacks appropriate consideration of global expansion. According to the market-based view, as Bain (1968) and Coeurderoy & Murray (2014) clarifies, successful enterprises are those that are able to take advantages of situations that exist in the external environment. In 2017, Vera Bradley initiated its new branding and brand positioning (Turnipseed & Gamble, 2014) The company did not only revamp its logo but also established a media plan that would enable it to communicate directly to consumers (Vera Bradley, 2017). Unfortunately, Vera Bradley seems to focus more on the American market without any consideration of expanding into foreign markets. It is unfortunate that Vera Bradley has not considered investing in the ever-growing Asian market despite having ties with manufacturers and suppliers in these foreign markets. The Asian market for handbags and leather accessories is growing fast. Japan and China make up 27% of the industry (Turnipseed and Gamble, 2014). Compared to the market potential, Vera Bradley has not appropriately invested in Japan since it has only one wholesale customer in this Asian country (Vera Bradley, 2017).

Thirdly, in line with the IBV framework, Vera Bradley has adequate resources and competencies to expand into foreign markets. In its attempts to increase market share and enhance its competitive advantage, Vera Bradley partnered with a wholesale outlet in Japan (Vera Bradley, 2017). While this partnership is a step in the right direction for the bags and accessories company, its rate of expansion into the foreign markets is extremely slow. Although Vera Bradley’s CEO, Robert Wallstrom, insists that the company’s long-term future growth depends on its ability to open and operate new offices, it has focused more on local than international growth (Vera Bradley, 2017). As of 2017, the third year after embracing it new strategy, Vera Bradley had opened four full-line stores, six factory outlet stores, renovated 15 of its existing stores, and enhanced its distribution channels with more than 130 Macy’s Belk and Bon-Ton department stores (Vera Bradley, 2019), yet the company had not made any efforts to enter into foreign markets. On the one hand, in line with the OBV, Vera Bradley’s multi-channelled distribution model is a major strength. On the other hand, with regards to the market-based view, Vera Bradley’s lack of consideration for global expansion is a weakness since it substantially reduces its chances of increasing market share, competitive advantage, sales, and profitability.

Fourthly, an analysis of Vera Bradley’s growth strategy through the international-business view framework exposes the company’s inability to manage its operations in Japan. According to the international-view framework, the effectiveness with which a firm manages its resources, organisation structures, and management processes determine its ability to perform in the international market. Over the years, Vera Bradley has invested heavily in human and technology resources. For instance, the company has a team of qualified, dedicated personnel who oversee the designing and production processes to ensure that products are unique and in line with emerging trends (Vera Bradley, 2017). Additionally, the organisation has a fully computerised distribution centre at Roankale, Indiana. The 428,500 square-feet facilities enable employees of Vera Bradley to accurately process and pack orders, as well as monitor shipments and inventory (Vera Bradley, 2017). The company integrates sophisticated management information systems in all facets of production and distribution to enhance operational efficiency. Although Vera Bradley has adequate resources and well-defined organisational structures, its management processes, especially in foreign markets is inadequate. After partnering with its wholesale customer, Mitsubishi Corporation Fashion Company in 2015, Vera Bradley discontinued its direct selling operations in Japan (Vera Bradley, 2017). The strategically ill-advised decision has limited the company’s growth in this prime market giving its competitors such as Michael Kors, Coach Inc., and Kate Spade & Company an upper hand. In other words, the best method of establishing the effectiveness and efficacy of Vera Bradley’s growth strategies is to examine its financial performances.

Just before making the decision to revamp its product, distribution, and marketing strategies in 2014, the company had recorded a 1% and 15% decrease in revenue and profits respectively. Since then, the company’s net revenue was $508, 990 in 2015, $502,598 in 2016, $485, 937 in 2017, $454,648 in 2018, and $416,097 in 2019. In this period, the company’s gross profit decreased from $269,009 in 2015 to $238,587 in 2019. However, as Figure 3 shows, the gross profit was at its highest in 2016 at $281,189 (Vera Bradley’s, 2017). In the same vein, the net income in 2015 was $38,449, $27,558 in 2016, $19,758 in 2017, $7,016 in 2018, and $20,757 in 2019.

Figure 4: Vera Bradley’s Net Revenue, Gross Profit, and Net Income (2015-2019)

The net revenue is derived from its multi-channelled selling model. As Figure 4 below shows, Vera Bradley’s direct channel is more profitable than the indirect channels. Revenue generated from the indirect selling was $335,602 in 2015, $351,286 in in 2016, $355,175 in 2017, $351,785 in 2018, and $328,034 in 2019. On the flip side, revenue generated from the indirect sales decreased from $173,388 in 2015 to $88,063 in 2019. The highest amount generated from indirect sales was $502,598 in 2016. The total net revenue was $416,097 in 2019 up from $508,900 in 2015. Figure 4 below compares Vera Bradley’s indirect and direct sales.

Figure 5: Vera Bradley’s Net Revenue by segment (2015-2019)

Given that Vera Bradley’s embraced new product, distribution, and marketing strategies to enhance its profitability, it is essential to subject the company’s financial performance to a Financial Ratio Analysis (FRA). Various ratios that use the financial performance of the firm in the last 5 years were generated to examine the company’s financial performance as presented below. The liquidity ratios in Figures 5 and 6 below show that the company can readily settle its short-term debt obligations, which is a positive performance indicator.

Figure 6: Vera Bradley’s Current ratio

Figure 7: Vera Bradley’s Quick ratio

The leverage ratios in Figures 7 and 8 below indicate that the company’s assets surpass its debts by over thrice and thus the company can manage any debt-related issues effectively.

Figure 8: Vera Bradley’s Debt to Assets ratio

Figure 9: Vera Bradley’s Debt to Equity ratio

The profitability ratios in Figures 9 and 10 below indicate a company that is profitable with a gross margin profit of over 50% throughout the years.

Figure 10: Vera Bradley’s Return on Equity ratio

Figure 11: Vera Bradley’s Gross Margin Profit ratio

Other ratios are presented in the appendices section in detail.

Vera Bradley’s strategic plan towards enhancing its market share, competitive advantage, financial performance, and long-term shareholder value has had mixed results in the last five years of implementation. To restate, the strategy focused on three primary areas: product, distribution channels, and marketing. The product development and release strategy is a primary strength for Vera Bradley. The company has a broad product portfolio that increases volume sales. All these products integrate unique patterns, fabrics, innovation, and newness, factors that have proved to be effective in attracting and retaining clients. Today, Vera Bradley has a group of long-term consumers who are loyal and enthusiastic about the brand. The loyal customers act as brand advocates, a fact that has led to increased brand recognition and intent to buy. Naturally, strong customer loyalty enhances a company’s competitive advantage. By focusing on top-performing products and newly released collections, the organisation has greatly succeeded in full-price selling, thus increasing profitability.

Efficient distributing channels remain as a top priority strategy at Vera Bradley. Its efforts to increase market share, the organisation embraces a multi-channelled approach that encompasses both direct and indirect selling. Vera Bradley has a substantial number of full-line stores, factory outlets stores, and thousands of third-party department stores. Additionally, the company’s products are available to consumers from multiple online platforms. Apart from adequate human resource, the organisation has effective management information systems that speed up the design, production, and distribution processes. Unfortunately, as the market-based view shows, Vera Bradley is keen on increasing its internal market share while neglecting the need for global expansion. Not only has the company failed to venture into new markets, especially in Asia, but Vera Bradley has also shown an inability to run direct selling business in Japan. This inability has severely reduced its market share and profits. After all, Vera Bradley’s direct selling avenues are more profitable than indirect selling channels.

Vera Bradley’s marketing strategy is both efficient and effective. The company conducts an aggressive marketing strategy that integrates print, experiential, social, and digital approaches. Vera Bradley’s has succeeded in making its brand ubiquitous. The periodic product releases generate excitements around the new products. Over time, the aggressive marketing strategy has not only helped the company reach new potential customers but also enhanced connection with its loyal clients.

5        Chapter 5: Conclusion and Recommendations

5.1        Conclusion

Vera Bradley’s strategy has been effective and efficient in helping the company enhance its competitive advantage and market share. Over the years, Vera Bradley has succeeded in designing and producing unique products that align with emerging trends and customer preferences. The firm has adequate human expertise and technology resources required in the production and distribution of its products. As a result, the organisation has nurtured strong consumer loyalty that has established it as an authoritative premium global lifestyle brand. The multiple outlets have made it easy for the customer to access and buy the products thus increasing profitability. Nonetheless, an analysis of the multi-channelled mode of distribution shows that direct selling outlets have been more profitable than indirect selling points for the past five years. More precisely, revenues from indirect selling have drastically reduced. Finally, Vera Bradley’s aggressive marketing has been effective in enhancing brand visibility and awareness. Undoubtedly, the company’s strategy has improved the company’s comparative standing, long-term shareholder value. Despite the increased market share in the local market, the strategy has not been effective in enhancing Vera Bradley’s financial position. Notably, one of the reasons for Vera Bradley to adopt multi-channelled distribution model was to increase sales and profitability. On the contrary, the net revenue from indirect segments has gradually decreased from $173,388 in 2015 to $88,063 in 2019 (Vera Bradely, 2019). These losses have adversely impacted the continuous gains secured in the direct selling segment. Due to these discrepancies, Vera Bradley’s net revenue is $416,097 in 2019 down from $508,990 in 2015. In the same vein, the net income has decreased from $38,449 in 2015 to $20,757 in 2019 (Vera Bradley, 2019). Vera Bradley’s net income reached its lowest in 2018 when it was $7,016 (Vera Bradley, 2019).

5.2        Recommendations

For Vera Bradley to further enhance its competitive advantage and financial position, the premium global lifestyle brand must resolve the following inadequacies inherent in its current strategy. One, weak relationships between the company, manufacturers, and suppliers. Two, inadequate global expansion strategies. Three, focus more on increasing direct selling outlets rather than indirect selling points.