Strategic Capabilities

Over the last decades, the Hong Kong garment industry has enjoyed the golden time with the accelerating trend of economic globalization. Being a renowned international brand is one of the significant business strategies for building competitive advantages. Koyo Jeans is a fashion brand that has successfully transformed from a local garment wholesaler and retailer to international brand. Its international expansion is a deliberately designed and long-term strategy that well utilizes existing capabilities of the firm and leverages their unique capabilities in search of location-specific advantages (Dunning 1988). In the course of international expansion, Koyo Jeans is identifying the opportunities and risks, propelling the strengths, promoting creativities and avoiding the weakness. This assignment is based on the analysis of internationalization of Koyo Jeans, by assessing its value chain, strategic capabilities and SWOT.

Porter (1998) defines value chain as the activities taken by the business and relates them to the analysis of business strengths and weaknesses. It consists of primary activities and support activities. Primary activities are directly associated with producing and delivering products or service (e.g. inbound logistics, operations, outbound logistics, marketing and sales, and service). Relating the Koyo Jeans case study, inbound logistics , it is headquartered in Hong Kong and manufactured in Humen factory and this implies that its most raw materials can be sourced from China where it is cost-effectives. Also, the Hong Kong's ports are convenient so that the logistics cost and cycle can be reduced. Second, regarding to operations, Koyo has two different production lines: low-end products for wholesale markets and high-grade Koyo products (Koyo William). The wholesale ran on a short inventory cycle and helped the high-brand products proceeding. The branding Koyo products help the firm build competitive advantage and customer loyalty in the long-term. For outbound logistics, Koyo expanded to international markets under franchising . It only chooses the experienced franchisee to ensure the brand reputation in the global markets. The company introduces a computer system that produces a complete analysis report for franchisee to help them plan and control their orders and inventory accurately. As to sales and customer service, Koyo runs two types of stores, proprietary and franchise stores . The proprietary stores provides the fastest and most direct customer feedback that is beneficial to gathering market response and meeting customer needs. Franchise store is good for rapid expansion and adaption to local markets. Moreover, Koyo embarked on online shopping for young customers and used system management software in sales and inventory ordering. Turning to Koyo marketing, the firm continuously run fashion show and participates exhibitions for its products . Also, it keeps sponsoring the outfits of singers, actors and program hosts for promoting brand exposure and recognition. In addition, Koyo has strict requirements for store decoration and displays for creating unique image and good visual effects for customers. Its computer system has pictures of all shops, their sizes, the sizes of show windows and other information. Therefore, the computer is able to show simulations of how to display when launching new products.

Support activities are 'backup' activities which are not directly involved in manufacturing, and helpful to improve effectiveness and efficiency (Johnson et al. 2008). It may involve human resource management, research and development and facility management. Firstly, Koyo meet some limitations in terms of human resource management due to rapid expansion. It experienced the shortage of talented individuals, especially for regional managers and visual merchandisers. On the other hand, in line with the expansion, the employees were promoted relatively quickly and delegated appropriate authority such as office infrastructure purchase, particularly in mainland China. Second, the design and development department is responsible for catching up fashion flow and quality improvement. The unremitted efforts enable Koyo Jeans close to international standard. For the facility management, the Koyo case shows that it has introduced a computer system to control ordering and managing market responses. Also different balance sheets are used to manage two production lines to guarantee efficiency.

A clear understanding of value chain benefits to identify the strategic capabilities of Koyo Jeans. Strategic managers need to clarify which activities within the value chains are associated with building competitive advantages for the organization (Johnson et al. 2008). Strategic capability is referred as 'the adequacy and suitability of the resources and competences of an organization for it to survive and prosper(Johnson et al. 2008:95). Only when the strategic capability is distinct from other competitors, the competitive advantage could be created (Thomson et al, 2004). The strategic capabilities involves threshold capabilities and capabilities for competitive advantages. Regarding to Koyo Jeans case, the threshold capabilities include