Citi Trends External and Internal Environmental Analysis Essay Example

Citi Trends External and Internal Environmental Analysis Essay Example Citi Trends External and Internal Environmental Analysis Paper Citi Trends External and Internal Environmental Analysis Paper his paper will include an external and internal environmental analysis of Cit Trends, including the most important external environmental factor in the remote, industry, and operating environments, the most important internal strengths and weaknesses, an assessment of their resources, and an assessment of their competitive position and possibilities. Most Important External Factors in the Remote Environment Factors that Cit Trends cannot control make up the remote environment. The remote environment of Cit Trends includes economic factors, social factors, political factors, and technological factors (Frenzy, 2012). Cit Trends Economic Factors Cit Trends most important economic factors are a fall in customer transactions and below normal total price of customer purchases. The main reason for these factors was a defying economy for their essential customers. The downfall in the economy has had a large impact on many businesses. Customers have not been spending the money they used to spend and some have stopped shopping altogether for name brand clothing settling for heaper brands to stretch their dollar because of a low economy (Form 10-K for Cit Trends Inc. 2012). Cit Trends Social Factors Changes in fashion trends are a major social factor for Cit Trends. The clothing industry universally and Cit Trends essential customers are specifically exposed to quickly changing fashion trends. Cit Trends will have to expect and identify any changes in fashion trends so they can make appropriate changes in the products they carry (Cit Trends Inc. Form 1 0-K, 2011). Cit Trends political Factors An increase in minimum wages is one of the main political factors that will have effects on Cit Trends. Cit Trends present employees and new hires will have to make at least the new federal minimum wage of $7. 25 per hour. This means any employees currently working at a rate of below $7. 5 per hour will have to be raised to a level of pay at or above this rate. The increase in minimum wages could have an opposing effect on Cit Trends financial situation and their results of operations (Cit Trends Inc. Form 1 0-K, 2011 Cit Trends Technological Factors Todays technology progresses at a fast rate. Cit Trends uses many information technology systems, such as IBM computer systems, software programs to support many areas of its business, point-of-sale software to operate its cash registers, hand-held scanners to mark sown and reticent merchandise, and software from Workday to process payroll and simplify unman capital management processes. They have to stay up-to-date on any upgrades and updates needed to their software to perform satisfactory business operations (Cit Trends Inc. Form 1 0-K, 2011). Cit Trends P. E. S. T Analysis Valetudinarianisms Laws, Current Federal Minimum Wage Law, proposed New Federal Minimum Wage Law, Antitrust Laws, Fair Trade Decisions, Tax Programs I Economist current recession of the home economy in the United States, Current recession of the Global economy I Socializing trends, stores located in inner city locations in tough areas whose annual should income ranges from targeting specifically the urban African-American shopper I Technological developments in software, Upgrades and updates in current software currently being used by Cit Trends, Replacement solutions for any out-of-date information technology currently in use Most Important External Factors in Industry Environment The retail clothing industry in the united States has about 100,000 stores nationwide and collects a shared SSL 50 billion in proceeds annually. The industry is very intense the 50 biggest companies bring in 65% of the entire industry incomes. Most of the companies are specialized and have found a particular market of customers to please. The size of companies making up the industry ranges from small independently owned shops to large department stores (Fulcrum Inquiry, 2010). Most Important External Factors in Operating Environment The operating environment includes customers, creditors, investors, employees, the marketing environment, and how Cit Trends uses and obtains resources (Frenzy, 2012). The external operating environment consists of Cit Trends competitive position, their customer profile, their reputation mongo suppliers, their reputation among creditors, and accessible labor market. Cit Trends Customer Profile Cit Trends caters to urban African-American consumers. They provide clothing and accessories for men, women, and children (Haynes Publishing Group, 201 1). They sell hip-hop jeans and over-sized t-shirts to younger consumers as well (Reference for Business Company History Index, 2012). Cit Trends Reputation among Suppliers Cit Trends upholds sound sourcing relationships with a large group of suppliers. They have bought merchandise from around 1,000 vendors in a 12 onto period. They buy merchandise through planned programs with vendors at reduced prices and resourcefully through close-outs. To promote vendor relationships, they pay vendors on time and seldom ask for typical retail reductions like promotional and markdown allowances (Form 10-K for Cit Trends, 2012). Cit Trends Reputation among Creditors Cit Trends maintains a good reputation with its creditors. On October 27, 201 1 they entered a $50 million dollar line of credit with Bank of America that replaced a prior $20 million dollar line of credit. With the new line of credit Cit Trends has the capability to increase the line of credit to $75 million. Cit Trends has not borrowed any money with either the new or old line of credit (Cit Trends Inc. ? Form 1 0-Q, 2012). Accessible Labor Market Cit Trends employs 5,300 employees as of 2012. They have 108 executives at their Savannah, Georgia location alone (Hooker, 2012). Cit Trends rates below average in their number of employees among other like compan ies. The whole workforce of the apparel stores industry is estimated to have about 304,450 employees. Cit Trends employs 85. 65% fewer employees than the services sector, 81. 4% fewer that the apparel stores industry, and 78. 8% fewer than the total number of employees for all stocks. Cit Trends uses the Internet as a means of filing a job application for employment with them (MicroVAXs, 2012). Number Of Employees among Related Companies (MicroVAXs, 2012) Cit Trends Most Important Strengths Cit Trends effectively TA regrets the African-American culture of shoppers. Nearly 70% of their customer base is African-American. This is achieved by being able to locate stores in the neighborhoods where this particular demographic is located. They also carry mainly urban apparel, brands, and a mall home dcord section that focuses on the black culture (Business Library, 2006). Cit Trends can sell name brands of clothing and accessories at a low price. They sell name brands, such as Apple Bottoms, FEB., Rockaway, Path Farm, Baby Path, Sean Jean, and Decides. Cit Trends sells these name brands at 20 to 60% below the prices of department stores (Business Library, 2006). This merchandising puts them in a position for continued growth and profits. Cit Trends is a family oriented store. They carry apparel and accessories for the entire family, men, women, and children. Some of their competition like Dots and Rainbow also target African-American shoppers but they carry mainly womens apparel (Business Library, 2006). Cit Trends has an effective buying team. They believe looks are more important than the brand. The look has to be right first and the brand second. The buying team is trend-driven and can focus on key looks in season instead of concentrating on specific name brands. They purchase apparel worldwide at exceptional prices to pass the value on to the customers (Business Library, 2006). Cit Trends Most Important Weaknesses Cit Trends has a large turnover in employees. In 2005 and 2006 they had a 0% turnover rate in store managers alone. They also have a considerable turnover rate in sales associates. Many of the employees they hire as sales associates lack experience and must be properly trained (Cit Trends Inc. Form 10-K, 2011). Store shrinkage is another weakness. 50-70% of Cit Trends shrinkage was coming from employee theft, including merchandise being taken out the back door, and cashiers performing falsified voids. Another substantial portion of loss was coming from shoplifting and burglary (Verify, 2012). Assessment of Cit Trends Resources Cit Trends has many valuable resources. They take pride in their inventory that includes name brand and private label apparel for the entire family, accessories to accent the apparel, and home dcord. They have many valuable employees in their stores and distribution centers including executives, managers, assistant managers, and sales associates. They also have a cash flow from operations, short-term trade credit, borrowing under their revolving lines of credit, long-term debt, capital leases, and cash proceeds from their initial public offering. They offer a layaway program in which customers pay 20 percent Of their purchase and a $2 fee down and they aka payments every two weeks with 60 days to pay the layaway out (Cit Trends Inc. Form 10-K, 201 1). Cit Trends Competitive Position and Possibilities Cit Trends depends on suppliers having leftover inventory and they resourcefully purchase the inventory. They have good access to inventory. Some of their competitors have been going out of business. Their stores are in strip malls. Overall Cit Trends seems to have a fairly good competitive position (Haynes Publishing Group, 2011). Some of Cit Trends competitors include TAX Companies, Ross Stores, Coat, Burlington Coat Factory, Its Fashion, Rainbow, Dots, Fashion Cents, Simply Fashions, Wall-Mart, Roses, Target and Smart. The methods of competition used are fashion, assortment, pricing, and presentation of the merchandise. They also believe they offer a more inviting Store format than the off-price retailers, including using carpeted floors and remarkably displayed brands (Cit Trends Inc. Form 10-K, 201 1). Cit Trends faces many possibilities in competition. Many of their competitors are larger than them and have significantly better resources than them. As a result, the competitor may adjust better to changing market notations, take advantage of new opportunities and apply better pricing demands on suppliers than they can. Many of their competitors have better name recollection among customers than they do and purchase considerably more merchandise from vendors. These competitors may buy branded merchandise that Cit Trends cannot purchase because of their name recollection and relationships with their suppliers, or they may buy branded merchandise with better pricing reductions than Cit Trends. Their local and regional competitors have widespread knowledge of the customer base and may acquire more loyalty from customers than Cit Trends. If the customer base they serve is satisfied with the selection, quality, and price of their competitors products, customers might decide not to shop at Cit Trends. Furthermore, if their current competitors or other retailers choose to concentrate more on Cit Trends core customers, mainly African-American customers, they may have more difficulty in competing effectively, their business and results of their operations could be badly affected, and the market price of their common stock could suffer (Cit Trends Inc. Form 10-K, 201 1). Conclusion Performing an external and internal analysis of Cit Trends helps to identify heir strengths, weaknesses, opportunities, and threats. This process, better known as a SOOT analysis is a very helpful tool in strategic planning. The PEST analysis is used in assessing the external environment of Cit Trends.