Business in Danish Clothes Company

Table of contents

1 Introduction 3

1.1 International Managerial Economics 3

1.2 Purpose of the report 3

1.3 Problem formulation 3

1.3.1 Description of the firm 3

1.3.2 Problem identification 3

1.3.3 Problem solving 3

1.4 Delimitations 3

2 Presentation of the firm 4

2.1 Bestseller 4

3 Market structure 5

4 PRODUCT AND PRICE 7

5 Value Creation 8

5.1 What is value creation and why is it so important? 8

5.2 Ways to create value 8

5.3 Capturing Value 9

6 Bestseller and transaction costs 10

6.1 Transaction costs in relation to Bestseller 11

7 Diversification 12

7.1 Cost of diversification 12

8 Porter's five forces 13

9 Blah 15

9.1 Bestseller's Organizational Architecture. 16

10 Problems for Bestseller 17

11 Conclusion 18

A Appendix 19

A.1 Log (project period) 19

1 Introduction

1.1 International Managerial Economics

International Managerial Economics is a subject we are attending at our first year. The subject is a guide to make a business successful, with using model, methods and theories from the business world.

1.2 Purpose of the report

The purpose of the report is to find a company, identify problems the company are going to face in the near future (or are facing right now) and find solutions for the given problems using relevant models and methods. The purpose is also identifying the company's strategy, structure and how they estimate prices.

1.3 Problem formulation

1.3.1 Description of the firm

Who founded Bestseller and when? How many employees are involved in the Bestseller group? Where does Bestseller focus their markets (import and export) - which part of the world? Where does Bestseller's production take place?

1.3.2 Problem identification

Why does Bestseller want to create and capture value (importance of value creation)? Why is it important for Bestseller to look at managerial economic-factors in their situation? (Detailed ques-tions in 1.3.3 Problem solving)

Why are there problems involved in the EU cloth-quotas (import restrictions)?

1.3.3 Problem solving

How does Bestseller create and capture value? How does Bestseller estimate the prices for their products? Which market structure should Bestseller adapt to? How can transaction costs be related to Bestseller and could they improved in this area? Does Bestseller get benefits from their diversifi-cation? How can Bestseller use Porter's Five Forces?

How does Bestseller compensate the losses from China and are there other solutions?

1.4 Delimitations

Because of the limited time we have for this project, we are going to concentrate the markets and production of Bestseller.

2 Presentation of the firm

By all

2.1 Bestseller

It's a family-owned business which produces cloths. It was established in Ringkшbing, Denmark, in 1975 by Troels Holch Povlsen.

Bestseller has more than 13000 employees world-wide focusing on designing, developing, selling and marketing its brands. Initially Bestseller's focus was on women fashion, but today its product targets young women and men, teenagers and children.

Bestseller's largest activity is retail, and exports its product to Europe, Middle East, Asia and Can-ada. Half of its production takes place in Europe and the other half in Asia. It doesn't own any fac-tories; instead it works with loyal suppliers and Bestseller it self remains the main supplier.

The first Bestseller ever opened in 1988 and since then Bestseller has grown to have more than 1800 stores over 30 countries. Bestseller has set some goals for the company where one of their focus points is to concentrate on developing people before business. In the past 30 years, Bestseller has been characterised by making cloths in "good quality at the right price" because they listen to their costumers' needs.

3 Market structure

By Nikola Ivanov

We will now talk about the market and the market structure, but first we will explain what is a mar-ket and a market structure.

"A market consists off all firms and individuals who are willing and able to buy or sell a particular product"

"Market structure refers to the basic characteristics of the market environment, including (1) the number and size of buyers, sellers and potential entrants, (2) the degree of product differentiation, (3) the amount and cost of information about product price and quality, and (4) the conditions for entry and exit of the market"

In this section of our project we should give an explanation, but in our case it will be an assumption, of the market structure our company is adapted to. We believe our company, if we consider Europe as a market, is in the competitive market mostly because it fulfils the characteristics of the competi-tive markets, which are:

 A large number of potential buyers and sellers

 Product homogeneity

 Rapid dissemination of accurate information at low cost