A basic strategy for American Apparel to get out of the drow
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A basic strategy for American Apparel to get out of the drowning debt and get the company
moving in the right direction is to analyze its current inventory and operations system and focus
on realignment with the mission and vision of the company. When analyzed the finances,
sales were increasing but profit was still decreasing. In 2009 American Apparel
achieved $558,775 in sales and $1,112 in profit. In 2013 American Apparel was able to increase
sales up to $633,941 however, profit was negative $106,298. American Apparel needs to make
some quick adjustments and focus on profitable activities, increasing sales is great however,
When the sales do not turn into profit that becomes a problem.
American Apparel needs to analyze its current inventory system with an emphasis on the cost of
goods sold. It can focus on which items have the highest profit and create marketing campaigns
to push those items. American Apparel can also re negotiate with current suppliers of raw
materials to ensure they are getting the best deal possible. They should also run cost analysis on
all their stores to find profit margins, considering closing stores that are not profitable.
A strategy American Apparel could us is price lining which is defined as "The strategy of selling
goods only at certain predetermined prices that reflect definite price breaks" (Pride, Hughes,
Kapoor, 2019) American Apparel should use price lining on new merchandise ensuring that them
prices are reflective of their vision to provide quality apparel. When the price is higher the
Consumers will assume that the quality is higher. This aligns with American Apparels mission of
providing high quality apparel.
Another pricing strategy American Apparel can use is "The price of a product at a specific level
and compares it with a higher price" (Pride, Hughes, Kapoor, 2019) When analyzing their
inventory, they can identify inventory that has a low turnover and potentially discount the price.
This would bring in more traffic to the stores because it would advertise great deals and
discounts, once the customer is in the store, they will be more likely to spend some additional
money on higher priced items.
American Apparel experienced rapid growth and along the way failed to address operational,
compliance and marketing issues that led them away from the company’s mission and values.
American Apparels mission is “to make garments that people love to wear without having
to rely on cheap labor (Mehta, 2016). American Apparel went away from their mission
in 2009 when a federal investigation uncovered numerous undocumented workers and American
Apparel was forced to terminate a good portion of their workforce. They also relied heavily on
risky and provocative advertising working alongside of the CEO who was under scrutiny for
sexual harassment. American Apparel was so hyper focused on growth that they lost the ideas of
what the business mission was. Since the company parted ways with the CEO, they should also
part ways with the provocative advertising and focus their marketing back on vision of having a
company that creates high quality apparel avoiding the use of cheap labor and having the entire
process done in house.
The functional organizations that will help make this strategy successful will be the marketing
dept, the operations dept, the accounting dept, the sales dept and the HR dept. All departments
need to be focused on the same mission and ensure that the vision of the company is at the
forefront of all business decisions. The marketing dept needs to produce a fresh marketing strategy
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