Application of a two-dimensional matrix for determining strategic positioning of garment companies in Ukraine

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Application of a two-dimensional matrix for determining strategic positioning of garment companies in Ukraine

Nataliia Radionova

D.Sc. in Economics, Professor of the Department of Finance and Business Consulting, Kyiv National University of Technologies and Design, Kyiv,

Irina Tarasenko

D.Sc. in Economics, Professor, Head of the Department of Finance and Business Consulting, Kyiv National University of Technologies and Design, Kyiv,

Viktoriia Khmurova

PhD in Economics, Associate Professor of the Department of Management, Stay Trade and Economic University, Kyiv,

ABSTRACT

The article presents the results of a study of the strategic positioning of enterprises using a two-dimensional matrix. The main goal of the study is to form a two-dimensional matrix for effectively assessing the strategic position of domestic enterprises in the garment industry. A correctly developed and effectively implemented positioning strategy can provide not only a significant competitive advantage for an enterprise but also form its optimal strategic vector of development.

In modern market conditions checking the relevance of the strategic position used is becoming increasingly important for enterprises, which determines the relevance of the research topic.

The results of the analysis of modern trends and problems in Ukrainian, conducted in previous studies, garment companies provided an opportunity to determine as strategic variables for companies of the garment industry the consumer value of products (as an external market factor of competitiveness) and the costs of production and sale of products (as a combination of internal and external factors of the formation of a competitive advantage in terms of price). The specified indicators were proposed for the construction of the axes of the strategic positioning matrix, which was tested at six Ukrainian garment companies that produce the same type of products and operate in the same market segment

The scientific novelty: the proposed approach represents the toolkit for substantiating the direction of strategic development of garment enterprises using the matrix method, in the coordinate system: "consumer value of products" and "enterprise costs", which, unlike the existing ones, allows us to determine topological zones and to choose from the set of alternative strategies for the development of a garment enterprise, the most optimal.

The results of the conducted research can have applied value for the heads of garment and other manufacturing enterprises from the standpoint of improving the management of the strategic development of an enterprise.

Keywords: garment companies, strategic positioning, two-dimensional matrix, cost optimization, consumer value of products, competitive advantage

Радіонова Н, Тарасенко І., Хмурова В.

ЗАСТОСУВАННЯ ДВОВИМІРНОЇ МАТРИЦІ ДЛЯ ВИЗНАЧЕННЯ СТРАТЕГІЧНОГО ПОЗИЦІОНУВАННЯ ШВЕЙНИХ ПІДПРИЄМСТВ УКРАЇНИ

У статті представлено результати дослідження стратегічного позиціонування підприємств за допомогою двовимірної матриці. Основною метою дослідження є формування двовимірної матриці для ефективного оцінювання стратегічної позиції вітчизняних підприємств швейної галузі. Правильно розроблена та ефективно реалізована стратегія позиціонування здатна забезпечити не тільки суттєву конкурентну перевагу для підприємства, а й сформувати його оп-тимальний стратегічний вектор розвитку.

У сучасних ринкових умовах усе більшої значимості для підприємств набуває перевірка актуальності використаної стратегічної позиції, що обумовлює актуальність теми дослідження.

Результати аналізу сучасних тенденцій і проблем швейних підприємств України, проведеного в попередніх дослідженнях, дали можливість визначити як стратегічні змінні для підприємств швейної промисловості споживчу вартість продукції (як зовнішній ринковий фактор конкурентоспроможності) та витрати на виробництво й реалізацію продукції (як сукупність внутрішніх і зовнішніх факторів формування конкурентної переваги за ціною). Зазначені показники були запропоновані для побудови осей матриці стратегічного позиціонування, яка була апробована на шести українських швейних підприємствах, що виробляють однотипну продукцію та працюють в одному сегменті ринку.

Наукова новизна полягає в тому, що запропонований підхід представляє інструментарій обґрунтування напряму стратегічного розвитку швейних підприємств із використанням матричного методу в системі координат: «споживча цінність продукції» та «витрати підприємства», - який, на відміну від існуючих, дозволяє визначити топологічні зони й обрати з множини альтернативних стратегій розвитку швейного підприємства найбільш оптимальну.

Результати проведеного дослідження можуть мати прикладне значення для керівників швейних та інших виробничих підприємств із позицій поліпшення управління стратегічним розвитком підприємства.

Ключові слова: швейні підприємства, стратегічне позиціонування, двомірна матриця, оптимізація витрат, споживча цінність продукції, конкурентна перевага

INTRODUCTION

two dimensional matrix strategic positioning

Modern economic conditions in which garment companies operate necessitate the development and implementation of not only tactical tasks - increasing profitability, but also the strategic direction of development, taking into account the conditions of the influence of unforeseen events and factors. The development prospects of each company depend on the validity of the chosen strategy. Companies must spend resources purposefully and strengthen their positions in the market because an incorrectly defined strategy generates losses of material, labour and monetary resources and the main non- reproducible resource - time.

World theory and practice operate with different types of strategies, which are based on two main approaches to the definition of their types: a priori, according to which the types of strategies are qualified based on the provisions of theoretical, generic models, and a posteriori, which allows for the more accurate formation of different types of company development strategies in the strength of which is based not only on basic models but also is determined on the basis of the diagnosis of empirical data of a functioning company. At the same time, the primary task of this approach is the search for the most significant strategic variables, which will be the basis for the creation of strategic alternatives for the development of the company.

LITERATURE REVIEW

The results of the study of the works of domestic and foreign scientists give reasons to confirm that today the problem of determining the strategic positioning of enterprises in various industries is relevant. It is expedient to pay attention to enterprises of the domestic garment industry, which has significant potential in Ukraine.

S. Solntsev and O. Tarasenko provide an analysis of the relevance of the positioning strategy in their study, who proposed a scheme for checking the relevance of the position and showed the actualization of the position using the example of the enterprise "Veneto" [18]. Yu. Pogorelov [14], K. Belousova [14], O. Romanenko [17], and T. Oliinyk [17] consider the main elements of strategic positioning of enterprises in their research.

The application of the matrix approach to the development of the company's activity strategy has already been considered by scientists from different countries. Among the most well-known approaches, it is worth noting the "growth-share matrix" of the Boston Consulting Group (BCG matrix), the matrix "attractiveness - competitiveness" (the matrix of the General Electric Corporation and the managed policy matrix), the matrix "competitiveness - stage of the life cycle" Arthur D. Little, Hussey's matrix, Thompson and Strickland's "market growth - competitive positions of the company" matrix, etc., which is analyzed in the work Ippolitova I., Fedorchenko A. [6].

Thus, the matrix of I. Ansoff includes four alternative strategies of the company, which have found application in the field of increasing or maintaining the volume of sales of goods. These strategies include deep market penetration; market development; product development; and diversification [1]. The authors agree with N. Bieliaieva, who considers strategic positioning as an element of the strategic management system of an enterprise and provides the extended SWOT matrix of an industrial enterprise, which takes into account the opportunities and threats of the external environment, arising from the strengths and weaknesses of the enterprise itself [2].

We believe that it is appropriate to consider the issue of strategic positioning of enterprises engaged in the same type of economic activity. Thus, separate issues of the marketing component in the general strategy of enterprises engaged in foreign economic activity are disclosed by O. Bondar [3]. Diachenko T. pays attention to the strategic positioning of enterprises that provide repair services [4]. Kobernuk, S. [8], Kuzyk O. [9] and Prokopenko K. [15] consider strategies for enterprises of the agro-industrial complex.

The thorough analysis of scientific approaches to the strategic management of the enterprise allowed Zhukova D. to propose her vision of the system of strategic choice of the enterprise, which includes elements of derived data, the decisionmaking process regarding the choice of the strategy carried out by the person who makes decisions about the general strategy of the enterprise, and the received sets of strategic alternatives for enterprise development as a result of using the system [5]. The company's strategies for positioning in the foreign market are revealed in their research by Katsemir Ya. [7] and Petryk O. [13]. According to J. J. Lambin's approach, "competitive advantage is those characteristics, properties of the product or brand that create a certain advantage for the firm over its direct competitors" [10]. The specified characteristics, in his opinion, can be those related directly to the product, the provision of additional specific services for its maintenance, to the characteristics of sales or sale of products.

Based on the theory of J.J. Lambin and with the aim of providing an objective assessment of the level of strategic development of Ukrainian garment companies, a two-dimensional matrix of strategic positioning was developed (Figure 1). The basis of the matrix is the assessment of the coefficient of consumer value of products and the relative costs of a garment company. The use of this methodical approach will positively influence the choice of the most effective strategy for the development of garment companies and will allow to develop on its basis effective recommendations for their further development to increase the level of competitiveness [16].

Matiukha M. emphasizes the decisive role of information in making a decision about strategic positioning in the research [11]. The impact of reporting on the sustainable development of an enterprise, which will contribute to increasing its strategic positioning, is considered in the work of Skrypnyk M., Radionova N., Vlasiuk T., Bondarenko S. and Grygorevska O. [20]. In continuation of their research, M. Telovata and K. Bezverkhiy reveal the influence of the integrated reporting functions of an enterprise on management decision-making regarding the development strategy [23]. Panchenko V. [12], Kiblyk A. [12], Smolin, I. [21], Synytsya, M. [22], Yankovyj O. [26] in their scientific works justify the importance of strategic positioning of enterprises of various industries to increase the level of their competitiveness. The value of the positioning strategy for small business enterprises in ensuring their sustainable economic growth is considered in the works of Skuratovych I.; Lytvyn N., Panovoy I.; Ovcharenko I., and Hryhorevska O. [19]. Tarasenko I., Korolko O. and Belyavska K. investigated the evaluation of the innovative component in the system of strategic positioning of an enterprise [25]. Also, I. Tarasenko in her work revealed the role of increasing the efficiency of marginal profit management for the strategic positioning of an enterprise [24].

AIMS AND OBJECTIVES

Scientists consider the strategies of enterprises in relation to their positions in foreign and domestic markets, the influence of innovations, information provision and increasing competitiveness on the strategic positioning of an enterprise.

However, paying tribute to the theoretical and practical significance of previous scientific achievements, there is an urgent need to conduct a systematic study to determine an approach that will enable an effective assessment of the strategic positioning of domestic enterprises in the garment industry.

In this context, the purpose of the article is to form a two-dimensional matrix for effective assessment of the strategic position of domestic enterprises in the garment industry.

Considering the goal, the following tasks were set and solved:

¦ to choose two main markers that will be used as the basis of strategic variables for building a matrix for determining the strategic positioning of enterprises;

¦ to determine and justify the use of topological zones that will form four quadrants of the specified two-dimensional matrix;

¦ to analyze the results of an expert assessment of the quality level of garment products based on the results of the implementation of measures to improve the quality and consumer characteristics of products, improve the marketing complex and optimize costs;

¦ to calculate the coefficients of the consumer value of products and the relative costs of their production and sale by a group of garment enterprises before and after the implementation of measures to optimize costs and increase the consumer value of products;

¦ to determine the value of quality/price ratios and relative costs before and after the implementation of strategic measures;

¦ to demonstrate the position of garment enterprises in the matrix of strategic positioning "consumer value/costs" after the implementation of strategic measures to optimize costs and increase the consumer value of products.

Achieving the defined goal will allow garment industry enterprises to determine their current strategic positioning and improve their position by applying the proposed measures.

METHODS

The conducted research was based on the use of scientific approaches and methods, namely: the method of comparisons and generalizations - to clarify the existing scientific approaches to the strategic positioning of enterprises; the method of classification and systematization - to determine strategic zones of alternative development of sewing enterprises; the method of induction and deduction - to determine the conceptual basis of the two-dimensional matrix of strategic positioning of sewing enterprises; the analytical method - for positioning a group of sewing enterprises in the matrix of strategic positioning before and after the implementation of measures to optimize costs and increase the consumer value of products; the mathematical methods for calculating quality/price ratios and relative costs of the investigated enterprises; the graph&analytical method - to provide visibility of the material and schematic representation of the matrix for the selection of strategic zones for the alternative development of sewing enterprises.

RESULTS

The construction of a two-dimensional matrix of strategic positioning of garment companies involves (Figure 1): the coef-ficients of the consumer value of products (quality/price) are placed along the horizontal axis, and the coefficients of costs for production and sale of products are placed along the vertical axis. Each axis of the matrix forms 4 quadrants or certain topological zones: (I) Zone of consumer value of products; (II) Zone of high competitive positions; (ІІІ) Zone of low-cost products; (IV) Zone of weak competitive positions.

Figure 1. Matrix for the selection of strategic zones for the alternative development of garment companies.

Depending on the situation in the market of garment products, the presence of competitive advantages in terms of costs and the consumer value of products, a company can choose one of the alternative development strategies proposed by the authors of the study [16, с. 129; 18; 21, с. 9].

I. Zone of consumer value of products. At point 1,0, there is compliance of the coefficient of costs and the coefficient of consumer value of products of a company and competitors. Along the horizontal axis, at a point with a value higher than 1,0 - the coefficient of consumer value of products of a company exceeds the similar indicator of competitors. Along the vertical axis, at a point with a value higher than 1,0 - the coefficient of costs of a company exceeds the similar indicator of its competitors.

The strategy of high-value significance is the most acceptable for companies located in this topological zone. An important feature of the strategy is to provide products with additional value in order to create additional advantages in the market or to achieve an absolute level of competitiveness for a certain period of time (when there are no products with similar properties on the market - there are no analogues). When choosing this strategy, a company must ensure the unique properties of its products, which take into account the non-standard requirements of the target audience. Providing products with additional value can be manifested in the creation of a model brand image, the construction of extraordinary product promotion channels and its after-sales service, which are difficult for competitors to copy [7; 19, p. 745; 26, p. 162]. The main competitive advantages are revealed in the process of selling products due to adaptation of the assortment to the needs of the market, forced creation of new products, use of a brand, trademarks, and development of modern sales channels [3, p. 24; 8, p. 46; 12, p. 186].

In other words, the strategy of high-value significance is based on product dominance due to the creation of high consumer value and high costs of production and sale compared to the indicators of competitors. For the successful implementation of this strategy, a company must take into account consumer demand and the requests of buyers, their recognition of the value of the product in terms of quality and price parameters. These factors make it possible to set a higher price for the product compared to competitors [6, p. 47; 20, p. 9; 22, p. 115].

The effectiveness of the high-value strategy is most evident in markets with a small number of competitors using such a strategy. At the same time, a company must have strong marketing management and be characterized by production flexibility, which allows instant response to the market demand. The main risk for the successful implementation of this strategy is a lack of confidence that the high consumer value of products will provide a complete competitive advantage, because, for a target audience, the price may be no less important than the specific properties of products. In addition, the degree of differentiation of the company's products may not meet the expectations of buyers, taking into account the high costs of its production and sale, which lead to significant price increases.

II. Zone of highly competitive positions. At point 1,0, there is a correspondence between the coefficient of costs and the coefficient of consumer value of the company's products and competitors. Along the horizontal axis, at a point with a value higher than 1,0 - the coefficient of consumer value of the company's products exceeds the similar indicator of competitors. Along the vertical axis, at a point with a value lower than 1,0 - the coefficient of costs of a company's cost factor is smaller than the similar indicator of competitors.

In modern conditions, the success of the strategy is related not only to the special characteristics of products, which are created thanks to product and technological innovations, but also to the systematic control of costs, since companies need to work under conditions of certain price restraints [10; 24, p. 182; 25, p. 137]. An effective company development strategy should be aimed at eliminating weaknesses and inefficient costs that prevent its successful operation and the use of potential opportunities. The strategy of innovative development should be based on the creation of new product properties at the optimal level of costs, which will allow a company to function effectively and create new competitive advantages. At the same time, the emphasis is on the fact that in the conditions of dynamic changes in the external environment, in particular fashion trends, which is especially characteristic of light industry companies, the strategy of innovative development should be focused on the most effective use of existing opportunities, minimizing costs and creating new characteristics that will determine the market future success of a company. For companies located in this topological zone, it is advisable to choose the strategy of the highest value [1, p. 134; 5, p. 79]. The strategy is based on competitive price advantages and involves mass customization of market segments (taking into account individual orders) and significant adaptation of products to the real needs of consumers in order to constantly increase consumer value.

Recently, success has been achieved by new "wave" companies that have such a cost structure that allows them to participate in price competition, as well as compete in the direction of achieving high consumer value of products [15, p. 41; 17, p. 79; 23, p. 201]. Orientation to the growth of the consumer value of products is possible due to their higher quality when setting prices at the level of competitors or below them. Using this strategy, the company needs to reduce costs, which will allow it to reduce the prices of products, and at the same time not lose the achieved level of quality or even increase it. This will provide consumers with a high level of consumer value of products that will meet their requirements for properties, level of service, and price expectations, that is, at a lower level of costs than in competitors [2, p. 121; 14, p. 98; 16, p. 130].

The strategy of the highest value significance is effective in the presence of specific market circumstances. In apparel market segments where customers are satisfied with a wide variety of modified products but are price sensitive, this strategy is more effective than cost leadership strategies or differentiation. As a rule, a target audience of such market segments prefers middle-class products (as opposed to cheap standards of similar products presented by cost leaders or expensive similar products with a high level of differentiation and, accordingly, prices).

Having chosen the strategy of the highest value significance, a company must have the resources and potential to guarantee the same quality as competitors but with lower costs, a sufficient level of service but less expensive, and similar product properties but at lower prices, while focusing on achieving high profitability level [4, p. 152; 9, p. 181]. These tasks are especially relevant in the conditions of the increase in the cost of energy resources, raw materials and materials, which is a consequence of the financial and economic crisis and requires manufacturers to find methods of increasing the efficiency of management. At the same time, the most important target financial result of management remains profit, the possibility of maximizing which should be considered when choosing promising production technologies, provided that costs are simultaneously reduced.

The strategy under consideration is acceptable for companies in view of using the chance of competitive manoeuvring: creating real value for a consumer, it (the strategy) is between two opposite strategies - cost dominance and high-value significance, which allows a company to use the competitive advantages of both the first and the second strategy.

III Zone of low-cost products. At point 1,0, the coefficient of costs and the coefficient of consumer value of the company's products do not differ from the positions of competitors. Along the horizontal axis, at a point with a value lower than 1,0 - the coefficient of consumer value of the company's products is lower than the similar indicator of competitors. Along the vertical axis, at a point with a value lower than 1,0 - the company's coefficient of costs is smaller than the similar indicator of competitors.

Under conditions of lower consumer value of products, but at low costs (compared to competitors), companies of the topological zone of low-cost products can claim to choose a strategy of cost dominance. Despite the highly turbulent competitive environment in the garment market, companies, choosing this strategy, can outperform other market participants by setting low prices and obtaining significant revenues [11, p. 354; 13, p. 10].

Companies prefer the strategy of cost dominance if they do not have sufficient potential for competition at the level of product differentiation, ensuring a high level of consumer properties. The strategy is effective in the price-sensitive target audience segment.

The implementation of the specified strategy requires significant volumes of standardized production, the availability of technologies to reduce production costs, practical design solutions, minimizing costs in the areas of research and development, and a low-cost system of distribution and promotion of products. The requirements for the effectiveness of the strategy of cost dominance are: a high level of price competition in the market of garment products; standardized properties of products that meet the requirements of a certain target audience; the presence of a significant number of buyers in the market of garment products who have sufficient power to reduce the price of products.

Risks of the strategy are the possibility of copying the factors of cost and price reduction by other market subjects if they are not characterized by the exclusive competence of a company. When developing the strategy, the marketing tools of competition are insufficiently used.

IV Zone of weak competitive positions. At point 1,0, the cost factor and coefficient of consumer value of the company's products correspond to the positions of competitors. Along the horizontal axis, at a point with a value lower than 1,0 - the coefficient of consumer value of the company's products is lower than the similar indicator of competitors. Along the vertical axis, at a point with a value higher than 1,0 - the coefficient of costs of the company reaches a higher value than the similar indicator of competitors.

Companies when falling into the topological zone of weak competitive positions lose to competitors due to a higher level of costs and lower consumer value of products. In such circumstances, the company has a choice of one of three strategies - a strategy of cost dominance, a strategy of the highest value significance, or a strategy of high-value significance. The transition from the zone of weak competitive positions to the zone of consumer value of products and the formation of a strategy of high-value significance requires significant resources (investment, financial), as well as a high level of management and personnel competence. Endowment of a company's products with unique properties requires additional costs to achieve technological advantages, research works, and real marketing studies.

To test the methodical approach to the selection of the basic competitive strategy, 6 Ukrainian companies with more than 10 years of experience in the garment industry, which during the studied period had revenues from 20 to 60 million hryvnias, were selected. And they produced high-quality products in the middle price segment: PJSC Khmelnytskyi Garment Factory "Lileia", PJSC "Zoryanka Garment Factory", PJSC "Santa Ukraine", PJSC KVTF "Kremtex", PJSC "Uzhgorod Garment Factory", PJSC Chernihiv Garment Factory "Elegant". The proposed methodology was tested on the example of 15 models of women's dresses (mostly mid-season dresses), which had the largest share (50-60%) in the production of all the products of the investigated companies and were in high demand on the market. For the study, the coefficients of the consumer value of products (quality/price) and the coefficients of relative costs of the company compared to the standard were calculated and their positioning was carried out according to topological zones and recommended strategies for the development of companies.

The studied companies improved the quality characteristics of products and their consumer value by implementing clientcentric tools, a customer loyalty system, and outsourcing design services (Table 1).

Table 1. Expert assessment of the level of quality of garment products based on the results of the implementation of measures to improve the quality and consumer characteristics of products, improve the marketing complex and optimize costs. (Source: compiled by the authors based on expert evaluations)

Based on the results of the study, it was established that it is expedient to move garment companies from the zone of weak competitive positions to the zone of low-cost products with the choice of a strategy of cost dominance, which is based mainly on organizational and production skills that give the maximum practical effect at minimum costs.

Increasing the efficiency of the management system of garment companies contributed to the optimization of costs for the production and sale of products thanks to the implementation of measures for vertical corporate integration with suppliers of material resources; horizontal integration with garment companies for large-scale purchase of materials at reduced prices; cost savings due to the transfer of business processes for the design and modelling of garment products to outsourcing firms; implementation of internal reserves for reducing production costs (Table 2).

As can be seen from the data in Table 2, the indicators of the studied companies of the garment industry of Ukraine show that in the matrix of strategic positioning, the specified companies will be placed in the zone of weak competitive positions. At the same time, Garment Factory No. 3, Garment Factory No. 4, and Garment Factory No. 5 have the lowest coefficients of consumer quality and relative costs. The most urgent for such companies is the transition to the area of low-cost products with the development of a basic competitive strategy of cost dominance.

Table 2. Calculation of coefficients of consumer value of products and relative costs of their production and sale by a group of garment companies before and after the implementation of measures to optimize costs and increase the consumer value of products. (Source: compiled by the authors based on enterprise data)

It should be noted that the best coordinates in the matrix "consumer value/costs" have companies: Garment Factory No. 1 and Garment Factory No. 2, which are closest to the coordinates of the reference company (Table 2). This may indicate the greatest opportunities of the mentioned companies regarding the transition in the future to the topological zone of highly competitive positions with the development of a strategy of high-value significance.

Provided the implementation of a set of measures aimed at increasing the competitiveness of products, which are based on the use of the opportunities of both the internal and external environment, including cost optimization and improvement of consumer characteristics of products, garment companies will be able to form strategies of cost dominance and move from the zone of weak competitive positions to the zone of highly competitive positions.

The comparison of the value of quality/price coefficients and relative costs before and after the implementation of the strategic measures is given in the Table. 3.

Table 3. The value of quality/price coefficients and relative costs before and after the implementation of the strategic measures.

(Source: compiled by the authors based on enterprise data)