SWOT - Analysis

The SWOT analysis examines the organisation's external environment and also explores the
internal environment (Lynch, R 1997). This requires listing and analysing the main strengths of
business, its weakness and the likely threats and opportunities it will be facing in the future
(Doyle, P 1998). Organisational Strength
The strength of NEXT Plc is their adult fashion wear for people between 20 to 40 which are
sold under their own label. This is their main target group. While some of its competitors have
problems to satisfy this segment, NEXT managed it very well in the past, selling their stylish
products at reasonable prices. NEXT customers associate with the NEXT label - good quality
of the cloths used and good workmanship. As they are using their own brand they can react on
consumer wishes very quickly and have total control over the quality management.
Organisational Weakness
Further gains can be made by the e-commerce division. NEXT, who spent GBP 125,000 sees
the internet as an extension of the telephone to order their products online. It is nothing more
than a vehicle to get the orders to the retailer. Their competitors interpret the interne t
phenomenon differently. Debenhams for example invest more than GBP 5m on internet
technology and Mark and Spencer even spend GBP 50m in e-commerce and digital TV. Right
now, nobody can tell if e-commerce will be the future of shopping and customers are satisfied
sitting on the computer to chose their clothes. But if the trend of internet shopping goes further
NEXT is in a bad situation compared to its competitors because its platform is not sufficient
enough.
Another weakness is the concentration of similar type of clothing retail companies on the UK
market. This can damage NEXT if competitors gain market share or if consumers change their
habits and NEXT cannot adapt to these changing trends quickly. To diversify into foreign
markets could balance any possible risk of decreasing sales. Furthermore such a policy would
strengthen NEXT's position if the pound become weaker or if the government decides to join
the Monetary Union. Environmental opportunities
Nevertheless mail order is an important plank in the retail trading stakes. Employees aged 2040 have little time to do their shopping. So it is good that NEXT has gained a foothold in this
market. They are ranked number one among the High Street names which are offering mail

order clothing. This could be a great opportunity for NEXT to increase market sharespeaking of
the domestic market as of the foreign markets - to use their knowledge and experience over
the years they can make it even harder for its competitors to step in. More opportunities are
mentioned at chapter 6. Environmental threats
A threat is the low market growth and the strong competition. Some companies are very
aggressive in their attempts to gain market share or to maintain it. To reach their aim they are
offering high street products manufactured in third world low labour cost areas at dumping
prices. Tesco for example offered Lewis 501 denims twenty pound cheaper than the high street
shops.

3.3 Competitive Analysis

easily replace him in a short period of time. Therefore mutual dependence is rated
low.Bargaining power of customers
So far as the customer is concerned he has probably the most power because it is he who
buys the product and spends his money. The impact of an individual buyer who goes shopping
at a branch and seeks price cuts is likely to be negligible. However speaking more generally, if
the phenomenon was multiplied by many thousands of price conscious customers who are not
willing to pay the ticket price, management will need to cut prices to avoid losing sales.
Because clothing is not very item specific - a pullover is a pullover - whether you buy it from

NEXT or Marks and Spencer. The only way to attract cons umers to buy a company's products
instead of the competition's, is to add value, such as label, style, price or quality. But still there
is no guarantee that NEXT will perform better than other clothing companies. The customer
decides which product he likes - not the company.
Threat of new entrants to the industry
A threat to NEXT are the new competitors entering the market. Maybe not the small ones
because there is a lot of capital needed to go head to head with NEXT - the threat comes more
from the big labels, department stores or chain companies outside the UK. Companies such as
Calvin Klein and Donna Karan, for example, have money, knowledge and the power to enter
the clothing market in a short period of time. Both which opened their 8,000 to 10,000 square
feet stores on New Bond Street or Ralph Lauren which opened his 45,000 square feet store in
central London demonstrate how to infiltrate a rather conservative domestic market.
Additionally, US catalogue retailers are venturing into the UK market. Lands' End, the ninth
biggest mail order company in the US, had opened a subsidiary in the UK but also struggle
from the strong rivalry, sales are down by 1.9% to USD 143m (2000). Threat of substitute
products or services
Another threat in the eyes of Michael Porter is the issue of substitution. Speaking of the
clothing retail market this problem is not a big issue. A pullover can be a substitute for a jacket,
or trousers for skirts, but since NEXT is provider of all these items anyway so the impact of a
substitute is limited. However the threat in this market is that NEXT fails to note these trends.
The Customers would substitute NEXT with a trendier company if their products are not stylish,
interesting or mainstream enough to attract customers or the timing is wrong. Rivalry among
current competitors
There exist a huge number of clothes retailer in the UK approximately over 25,000 combined
with other outlets make them more than 45,000. This indicates a high rivalry between
competitors. In this phase of the market cycle where there is more or less no growth,
competition is often price-based and therefore very aggressive. To build customer loyalty with
price cutting strategies is very difficult if not impossible. That means consumers are looking for
the best offer with regard to price, service and quality. If NEXT wants to increase market share
it must take sales from its competitors and that increases rivalry. So it is a kind of price spiral
where companies have to cut prices to sell their products. This leads to decreasing margins
and probably to less competitors. This can be seen in the grocery shopping sector where
competition was such though that only a few big companies survived. Another issue are the

high export exit tariffs. If a company like NEXT, Marks & Spencer or C&A want to leave the UK
market it means they have to sell all their branches and get rid of most of their employees. This
causes a lot of problems in terms of the relevant trade unions, bad publicity
or cost for developing a social viability plan. These are some reasons why companies mostly
stay in their known marketplace instead of leaving them for new opportunities