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FSN 132 (24)
Chapter 4

In Fashion - Chapter 4.docx

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Department
Fashion
Course
FSN 132
Professor
Luann Lafrenz
Semester
Fall

Description
Chapter 4: The Business of Fashion - Business is the activity of creating, producing and marketing products or services; objective is to make a profit - Profit (net income): amount of money a business earns in excess of its expenses Economic Importance of the Fashion Business - Fashion business is one of the largest employers in the country and contributes significantly to the economy through materials, services, wages - Growth of mass markets, production and methods contributes to new job opportunities in fashion industry in design and market as well as production Scope of the Fashion Business - Fashion business has a lot of industries working to keep consumers satisfied – 4 different levels and are separate entities but work interdependently to provide the market with fashion merchandise Primary Level - Composed of growers and producers of raw materials of fashion: fibre, fabric, leather, fur producers - Earlier planning in colour and texture - Up to 2 years’ lead time is needed before goods are available to consumer Secondary Level - Composed of industries – manufacturers and contractors – that produce the semi-finished or finished fashion goods from the materials produced on the primary level - Designer and manufacturers of all apparel - Work from 6 months – 1.5 years ahead of consumers Retail Level - Ultimate distribution level  buy their goods from secondary level and supply them to consumers - Retail level work with primary and secondary; make initial purchases for resale to customers from 3-6 months before customer buying season Auxiliary Level - Composed of all the support services that are working constantly with primary, secondary and retailers to keep consumers knowledgeable about fashion – media (print, audio, visual) Diversity and Competition - Giant firms, small companies, regional/local, business side by side, sole proprietorship, conglomerates - All of these must understand their customer - Each company must compete with others for customers’ business- price, quality or innovation; businesses sells the same things Competition and Price - Selling garments for less may bring you more business but it is less money so still may need to cover cost and expenses - Goal is to it will attract more customers and sell more with a good overall profit (for low prices); competition is good to keep prices low - Private sale shopping sites, businesses are increasing their competitiveness to increase demand by limiting memberships Competition and Quality - Compete for customers by offering higher-quality goods; offering better fit, durable fabric and better styling - Increases choices available to consumers; maintain high status Competition and Innovation - Variety in types of merchandise and services offered to the public - Changes in taste and technology brings innovation to garments; constantly creating new business opportunities Forms of Business Ownership Sole proprietorship (single) - Ability to keep all profits, simple to form and easy to resolve, ownership flexibility - Unlimited financial liability, lack of continuity, management deficiencies Partnership (a few) - Ease of formation, greater financial capacity, less red tape - Unlimited financial liability, interpersonal conflicts, harder to resolve issues Corporation (many owners) - Specialized management skills, easy to transfer ownership, greater financial capacity - Difficult and costly ownership form to establish and dissolve, tax disadvantage, legal restrictions Business Growth and Expansion - Rise of corporate giants which grew mergers, acquisitions, internal expansion  led to demise of old famous sole-proprietorship - Corporate growth and expansion occurs internal growth, mergers and acquisitions Internal Growth - Ability to offer more services and broader assortments of merchandise - Horizontal growth- expands its capabilities on level which is already successful; (apparel add new lines or new branches) - Vertical growth: expand its capabilities on levels other than its primary function Mergers and Acquisitions - In a merger, one company is sold to another; forms a larger corporation’s greater purchasing power or they want to sell stock to obtain financial resources needed for expansion - Operating economies can be done by combining companies - Diversification – additions of various lines, products or services to serve different markets may also be a reason
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