The North Face Essay Example for Free

The North Face Essay The majority of the company’s products are sold in premium sporting goods retailers, and specialty backpacking, mountaineering, and skiing retailers. The North Face provides gear for professional and amateur athletes and enthusiasts using high-quality, technical outerwear. This company also sponsors major events to maintain and even increase its public profile. In 2010, The North Face sponsored the Ski Challenge, the Ultra Trail du Mont Blanc in France and the Lava redo Ultra Trail in the Italian Dolomite Mountains (Kennedy, 2012). The North Face has very stiff competition from well known companies such as Columbia Sportswear, and Patagonia. However they have fascinating state of the art technology to distance themselves from their competitors. Despite The North Face filing for bankruptcy in the late 90s, profits have risen by 37 percent the past year. This is mostly because of the popularity of the brand in Asia and its sponsorship for the Winter X-Games. It has earned a reputation as the ultimate, authentic outdoor brand. Their slogan â€Å"Never Stop Exploring,† has become popular amongst all athletes and outdoor enthusiasts. This outdoor apparel powerhouse has a very large and loyal fan base, and the demand for outdoor apparel is on the rise. In North America, performance outdoor apparel has grown 19% from 2004 to 2010. This trend is supposed to continue for at least another five years. As The North Face has been creating products with great quality and endurance, they plan to focus toward a greener supply chain and operations. Partnering with the blue sign sustainability standard for textile production, will help separate The North Face from their main market competitors Columbia Sportswear, and Patagonia. By looking at financial records, The North Face surpasses its second largest competitor, Columbia Sportswear, proving that it is the best in the industry. The North Face is named after the coldest most unforgiving side of a mountain, and has helped explorers reach unbelievable heights in the Himalayas. This remarkably powerful corporation is going to continue to design and provide the best for all outdoor enthusiasts, remaining on top for years to come. The North Face was chosen due to its involvement in both the sport and recreation fields. Their mission statement is â€Å"Never Stop Exploring†. Their vision statement as a business is â€Å"Our passion is beyond setting records and achieving fame. For us, its all about changing lives, not just our lives, but also, the lives of those people who inspire us to aim for extraordinary dreams† (Over 40 Years of Innovation and Exploration, 2012). For more than 40 years, The North Face has been distributing an extensive line of performance apparel, equipment, and footwear. The company’s purpose is to push the boundaries of innovation so their customers can push the boundaries of exploration (Over 40 Years of Innovation and Exploration, 2012). The North Face is extremely proud to be the first choice of equipment and apparel for the world’s most accomplished climbers, explorers, and winter sport enthusiasts. In 1966, Douglas Tompkins and Kenneth Klopp founded The North Face in San Francisco’ North Beach neighborhood. They chose this name of their equipment retail store because the north face of a mountain in the northern hemisphere is generally the most difficult face to climb (Our Story, 2011). By 1968, The North Face was designing and manufacturing its own type of technical mountaineering apparel and equipment. By the end of the 1980s The North Face became the only supplier in the United States to offer a comprehensive collection of high-performance outerwear, skiwear, sleeping bags, packs and tents (Our Story, 2011). The North Face brand was created to give customers exactly what they need and they are concentrating on creating environmental friendly and high sustainability products. They wanted to give the customers huge satisfaction and build trust between them and the brand. By using products, which support better performance and comfort at different locations and climatic conditions, creates a long-term relationship with the customers. In the past innovative product design and consistent development and introduction of new products have always been North Face’s greatest strengths. In 1975 North Face introduced a standard in the outdoor equipment industry with its geodesic dome tent. This design became the standard for lightweight, high-performance tents used in high-altitude and polar expeditions (Our Story, 2011). The geodesic dome also became very popular for general backpacking and camping as well. The same year North Face also introduced another original, sleeping bags incorporating shingled construction of synthetic insulation. Like the dome tent, these sleeping bags have become the industry standard (Our Story, 2011). An â€Å"extreme skiwear† line was later introduced which involved a complete line of severe cold weather clothing. By the late 1980s North Face were the only manufacturer and distributor in the United States of a comprehensive line of premium-grade, high-performance equipment and apparel used in mountaineering, skiing, and backpacking (The North Face Inc, 2009). Currently, Geoffrey D. Lurie leads The North Face team as Chief Executive Officer, and Director (Company Overview of The North Face, Inc. 2011). The North Face is owned by VF Corporation, who is lead by the team of Eric C. Wiseman and Robert K. Shearer (About VF Management Team, 2012). The VF Corporation is a leader in branded lifestyle apparel including jeans wear, outdoor products, image apparel, sportswear and contemporary apparel brands. The principal products and services offered by The North Face are men, women, and children outdoor apparel for hiking, cold weather climates, running, rock climbing, and camping. They offer equipment such as tents, sleeping bags, back packs, and kits for rock climbing, and camping. They offer services such as events throughout the year that give their customers opportunities to enjoy the outdoors while also getting to know the brand. Today, The North Face offers a wide variety of products like outdoor equipment such as thermal tents, and climbing tools. They are very famous on college campuses these days with their outer wear ranging from their jackets to winter hats and gloves. These products meet customers’ needs and wants by providing quality winter and hiking gear. The North Face touches customers emotionally by satisfying their technological needs. Every product they make is made with the thought that â€Å"each consumer is an explorer and they require a product with high quality, comfort and something they would value for the long–term† (Our Story, 2011). They value their customers and stick to their company values of using high quality fabric, testing their products endlessly, and constant improvement (Our Story, 2011). The demand for The North Face products will definitely increase in the future. Global demand for performance outdoor apparel worn by individuals taking part in sports pursuits is outpacing other sectors of the total active sportswear market, according to a new report from just-style, with growth set to soar by 22% over the next six years†(Smith, 2011). In North America, performance outdoor apparel has grown 19% from 2004 to 2010. This trend is supposed to continue for at least another five years. Europe is suppose to have a predicted 18% increase within the next 5 years (Smith, 2011). Outdoor apparel will be very successful in the developed world, but in third world countries they will hardly grow at all. In the past, outdoor retail products were seen more as a luxury rather than a necessity. Lucky for The North Face, the economy hasn’t really impacted the company as a whole compared to the industry in general. The North Face is classified as a â€Å"premium brand†, thus targeting â€Å"high educated individuals†. New stores have continued to open, and plans to grow and expand are emphasized each day. Just like any organization, The North Face has high objectives in regards to their products and services. One objective is to improve the brand value perception from 65% to 85% by the end of the year (2010 Sustainability Report, 2010). Based on a survey that was conducted, 65% of the respondents think that they are getting a great value out of The North Face Products for the amount they pay. Whereas another survey shows that the brand is not too affordable. Another objective for The North Face is to increase customer loyalty from 68% to 85% by the end of 2012 (Over 40 Years of Innovation and Exploration, 2012). Based on the brand research, they found out that only 74% of The North Face customers are more likely to buy its products again. Finally, The North Face plans to expand the product offering of the company from 4 to 6 activities. Their newest targets include runners and bikers. After conducting a survey with their customers, The North Face found that the top activity that respondents participate in, other than hiking, are biking and running. Therefore, The North Face wants to include more gear to accommodate this new market of runners and bikers. In order to reach its goals, The North Face plans on taking steps in order to meet its objectives. To achieve its goals, The North Face plans on creating strong awareness campaigns that emphasize the product technology and value of the products in order to decrease the perception of having prices way too high for a said product (2010 Sustainability Report, 2010). In order to increase customer loyalty The North Face Plans on developing more community outreach programs to engage customers. A simple solution is in place for the running and biking market, just simply begin developing products for that target market. The use of advertisements will help The North Face keep in touch with the customers and constantly remind them of product’s positive values (Over 40 Years of Innovation and Exploration, 2012). Maintaining long-term relationships with happy and satisfied customers will encourage them to continue buying the products. The technology used to make The North Face products is blue sign approved fabric. The blue sign standard guarantees that along the entire production chain products only contain components and pass through processes that are harmless to people and the environment (The Board Room Eco Apparel Environmental Standard, 2012). By supporting the blue sign standard, The North Face can focus not only on creating high performing, quality products but also on assuming greater responsibility for our consumers and the environment by minimizing the ecological impact of their supply chains (Product Responsibility, 2010). In addition to working with their primary suppliers, The North Face works hard to influence additional supply chain partners to partner with the blue sign system in 2010. Viewing the macro-environment surrounding The North Face is very interesting. Many factors influence the production of products, sales, and innovation. Social trends include brand popularity as well as possible body image and health issues. Everyone wants to fit in with the new styles, therefore with The North Face on the rise; sales will increase and become popular among customers. Since The North Face promotes healthy living, healthy lifestyles among consumers will become a huge trend with trying to stay in shape and avoiding obesity. Politically and economically, healthcare bills could determine if people would venture out and do adventurous activities with risk involved. Higher taxes and unemployment rates will pose a huge threat to The North Face due to its high prices. Currently, natural trends that are being used include the use of blue sign fabric technology explained earlier and finding innovative ways to recycle and reuse resources for future products. Technological trends that are being used include partnering with the most innovative leading materials engineers. With this partnership, The North Face creates the technically advanced fabrics needed to develop clothing and equipment that meet their high standards (Our Research, Design ; Development Process, 2011). One great example is the partnership with W. L. Gore, who helped design PacLite, â€Å"the most compressible, lightest weight GORE-TEX shell fabric available† (Our Research, Design ; Development Process, 2011). As The North Face has been creating products with great quality and endurance, they plan to focus toward a greener supply chain and operations. At least 65 percent of the fabric it uses to conform to the blue sign sustainability standard for textile production by 2015 (Guevarra, 2011). After two years of working with major suppliers to apply blue sign guidelines, 27 percent of the fabric used in The North Face products meets the standard (Guevarra, 2011). The further upstream we go, the more impact we have on [easing] the environmental impacts,† Adam Mott, corporate sustainability manager for The North Face (Guevarra, 2011). With that being said, the greatest benefits result by improving the sourcing and manufacturing of prime materials that are used in its products. The North face customers are usually single middle-middle or upper-middle class people, whose main occupation is teaching or having part time summer jobs. They are college or professional customers between 25 to 45 years old (Demographics of The North Face, 2012). Their income ranges between $40,000 to $60,000 dollars. They are consistent users with heavy frequency of purchase and conduct searches on the Internet (Demographics of The North Face, 2012). Surveys and studies show The North Face customers are interested in running in marathons and also environmentally aware. They enjoy being independent and typically purchase high performance products (Demographics of The North Face, 2012). The company targets prospect customers who are trying to explore new locations for outdoor activities like running. The customers are generally people who are trying to fit in the new environment or society. The North Face has very stiff competition from three major well known companies such as Patagonia, Columbia Sportswear, and Nike. Patagonia and Columbia Sportswear are in the same category of â€Å"outdoor† lifestyle brands, and Nike on the other hand targets a much larger variety of customers. Patagonia’s mission statement states: â€Å"Build the best product, do no unnecessary harm, use business to inspire and implement solutions to the environmental crisis† (Our Reason For Being, 2012). Founded by the mountaineer Yvon Chouinard, Patagonia, like The North Face, is a company that is deeply committed to preserving the earth and creating sustainable products. In 1972, Yvon Chouinard developed the idea of going green mountain climbing after finding out that the climbing gear his company manufactured damaged cliffs (Beginnings and Blacksmithery, 2012). Chouinard later developed aluminum chocks to replace the steel climbing gear. The Columbia Sportswear Company is positioned directly against The North Face and Patagonia. While The North Face and Patagonia target the extreme outdoor adventurers, Columbia Sportswear appeals more to the casual outdoor enthusiast. They believe that â€Å"the outdoors isn’t all about remote expeditions or climbing the world’s highest mountains. Anyone can enjoy the outdoors† (Columbia’s History, 2012). They are definitely aiming to sell to a much larger crowd of customers compared to Patagonia and The North Face. Columbia Sportswear is sold in over 100 countries worldwide. They use state of the art technology known as Omni technology, which focuses primarily on comfort focuses on comfort (Omni-Technology, 2012). Core technologies serve the following functions: thermal comfort, water repellent, lightweight, advanced traction, sun protection, advanced evaporation, advanced cooling, waterproof and breathable (Omni technology, 2012). Nike is the world’s leading supplier of athletic shoes and apparel. Each product line they offer is branded such as, Nike Golf, Nike Pro, Air Jordan, etc. Nike’s marketing and branding strategy is a key component to their huge success. Nike’s logo, â€Å"The Swoosh†, is one of the most recognizable logos in the entire world. They target the mainstream athletic crowd with their apparel, commercials and sponsorships. Competitively, all four companies have incredibly strong cultures and each has their own sets of strengths and weaknesses. Out of these sport and recreation apparel powerhouses, Patagonia, is the most serious threat to The North Face. However The North Face has some unique features that gives it an advantage over Patagonia and the rest of its competition. The North Face is a very trendy brand, and very popular with college students. It is available in thousands of retails stores for easy access, creating more of a mass market appeal. trendy brand of the two, hugely popular among college students and widely available nationwide in thousands of retail locations. Thus, The North Face has more mass-market appeal. On the other hand, Patagonia only has a handful of retail locations in areas that aren’t as populated. This happens to be part of their marketing strategy. The North Face’s marketing strategy is to focus on the athlete and their performance in The North Face gear. Patagonia focuses more on the clothing it sells, not the model. They place an emphasis on the fabric technology that they use in their marketing and only display their clothing on their website and catalogs. This is an area where both of these companies could improve on. North Face as a whole company is financially healthy. This is determined through the financial ratios provided by the annual report of V. F. Corporation for the year 2012. The North Face is a subsidiary to the VF Corporation and is represented as the stock symbol VFC on the New York Stock Exchange. In order to determine The North Face’s health, profitability ratios and its subcomponents were analyzed. Profitability ratios show the business’s ability to generate revenue as compared to its expenses and other relevant costs incurred during a specific period of time (Profitability Ratios, 2012). These ratios include profit margin, return on assets, capital structure, and return on investment. The North Face’s financial ratio for profit margin is 47. 9%. This was determined by taking the net income, dividing it by the corporation’s revenue, then multiplying the quotient by one hundred. The return on assets is 9. 5% which is determined by taking the company’s net income and dividing it by their total assets. The capital structure of the North Face is 24. 3%. To calculate the capital structure, you must take their long term debt, and divide it by shareholders equity plus their long term debt. Calculating the return on investment, you must take the gain from interest; subtract it by the cost of investment, then divide by the cost of investment. The North Face’s return on investment is 14%. The current accounts payable is $868,870,000, current ratio is 1. 91%, the working capital is 1. 2B, and their long term debt is 1. 83B (VF Corporation, 2012). The North Face company is healthy because their working capital is only 300 million less than their long term debt and they have a positive $868,870,000. 00 accounts payable balance. Financial records were not available for Patagonia, The North Face’s top competitor. Columbia Sportswear, The North Face’s second largest competitor, financial ratios were looked at instead. Columbia Sportswear as a company is also financially healthy. This is determined through the financial ratios provided by the annual report of COLM for the year 2012. Specifically we focused on the profitability ratios and its subtopics to determine the health of the company. Their financial ratio for the profit margin is 46%, ratio for return on assets is 7. 5, capital structure -5%, return on investment is 9. 6%, accounts payable is $148,700,000, and their current ratio is 3. 9% (Columbia Sportswear Company COLM, 2012). The North Face exceeds Columbia in all four categories. The North Face’s profit margin is 47. 9% compared to Columbia’s 46%. In return of assets, The North Face comes out on top with 9. 50% opposed to Columbia’s 7. 5%. The North Face’s capital spending is at 24. 0%, way above Columbia’s -0. 05%. In the fourth and final category, return on investment, The North Face closes it out with a 14% to Columbia’s 9. 60%. These ratios are so different because The North Face is more successful and sells more inventory than Columbia. They also get a much larger market draw. The North Faces product and clothing line is helping the company meet its objectives. This is because they are very successful and have nearly a 50% profit margin. In conclusion, The North Face, part of the Vanity Fair Corporation, was founded in 1966 later opening its first retail store in 1968. The company, located in San Leandro, California, brings the most technically advanced products in the market to accomplished mountaineers, climbers, skiers and explorers. The majority of the company’s products are sold in premium sporting goods retailers, and specialty backpacking, mountaineering, and skiing retailers. The North Face provides gear for professional and amateur athletes and enthusiasts using high-quality, technical outerwear. Their slogan â€Å"Never Stop Exploring,† has become popular amongst all athletes and outdoor enthusiasts. This outdoor apparel powerhouse has a very large and loyal fan base, and the demand for outdoor apparel is on the rise. As stated earlier, in North America, performance outdoor apparel has grown 19% from 2004 to 2010. This trend is supposed to continue for at least another five years. As The North Face has been creating products with great quality and endurance, they plan to focus toward a greener supply chain and operations. Partnering with the blue sign sustainability standard for textile production, will help separate The North Face from their main market competitors Columbia Sportswear, and Patagonia. By looking at financial records, The North Face surpasses its second largest competitor, Columbia Sportswear, proving that it is the best in the industry. The North Face is named after the coldest most unforgiving side of a mountain, and has helped explorers reach unbelievable heights in the Himalayas. This remarkably powerful corporation is going to continue to design and provide the best for all outdoor enthusiasts, remaining on top for years to come.