American Apparel's Vertical Integration Strategy in the Fashion Apparel Business
What are the benefits and costs of American Apparel's strategy of vertical integration in the fashion apparel business?
Based on the characteristics of the fashion apparel business and American Apparel's competitive positioning, analyze the benefits and costs of their vertical integration strategy.
Benefits and Costs of American Apparel's Vertical Integration Strategy
American Apparel's vertical integration strategy in the fashion apparel business offers both advantages and disadvantages. Let's delve deeper into the benefits and costs:
Benefits:
Cost Control: By owning and managing every step of the production process, American Apparel can eliminate middlemen and reduce outsourcing expenses. This enables them to provide competitive prices to customers.
Quality Control: With vertical integration, American Apparel has better control over the quality of their products. They can uphold consistent standards and ensure their clothing meets customer expectations.
Costs:
Increased Risk: Vertical integration involves significant investment and can be risky if market conditions shift. American Apparel bears the burden of owning and overseeing various parts of the supply chain, which can be challenging if demand decreases.
Limited Flexibility: While vertical integration offers control, it may restrict American Apparel's ability to quickly adapt to changing trends or seize new opportunities. Scaling or diversifying their business could pose obstacles.