Industry-based view

From the analysis of the competitive environment, it appeared that the rivalry is more intense than it has been before, due to price competition and the fact that the industry consists of a high number of players. Furthermore, it was identified that it can be difficult to gain brand identification due to the big players in the market. In regard to the rivalry, it can be argued that the fashion industry can be categorized as a red ocean. Due to the prevailing globalization and digitization of the world one could argue that the market and the demand is becoming increasingly homogenized. Therefore, it is important for the fashion companies of today to determine the right strategy in order for them to stay competitive. This will be examined through a use of Porter’s (1980) generic strategies (p. 35).

From the previous analysis of rivalry in terms of sustainability, it appears that implementing sustainability initiatives within fashion companies will include an increase in their costs. With that in mind, it can be argued that the generic strategy of overall cost leadership cannot be used for sustainability in comparison to conventional clothing, as this type of strategy is achieved through a cost structure significantly lower than competitors (Hooley et al., 2017, p. 45). However, within the future, the overall cost leadership can potentially become applicable for instance if the industry succeeds within innovations and developments in the area of sustainability, and these become less costly than they are now. Nevertheless, as it is today, implementing sustainability will require extra financial resources and will make a company’s processes more costly (Appendix 5, l. 46-47).

The industry-based view emphasizes that a company’s strategy is to be based on identifying a position within an industry that makes the company less vulnerable to the five competitive forces (Peng et al., 2009, p. 70). As the strategy of overall cost leadership can currently be excluded as an option, either a differentiation strategy or a focus strategy can potentially be implemented for a fashion company to achieve a less vulnerable position within the industry.

66 5.4.1.1. Differentiating through sustainability

According to Porter (1980), businesses can differentiate themselves through many dimensions, for instance design, brand image, technology, features, and customer service (p. 37). As it became apparent in the previous analyses, the fashion industry is participating in sustainability to the extent that there is innovation and initiatives taking place, but there prevails a lack of action despite formal commitments. Furthermore, it is far from all fashion companies that are participating in sustainability.

From the above, it can be argued that differentiation through sustainability for instance could be in the shape of a focus strategy. The aim of a focus strategy is to focus on a particular buyer segment or to focus on a particular segment in terms of a product line (Porter, 1980, p. 38). As identified, the fashion companies participating in sustainable have implemented focus areas and are not being sustainable on all parameters of their businesses. Based on that, a fashion company can choose a focus strategy on sustainability in order to differentiate from those. If a fashion company chooses to fully commit to sustainability throughout its entire business it can be categorized as a niche within the fashion industry, as it does not appear to be a prevailing phenomenon. However, Porter (1980) posits that with a focus strategy there will always be limitations in terms of the total market share achievable and this type of strategy will always include a trade-off between sales volume and profitability (p. 40). Also, as there is still a lack of innovation and development within the area of sustainability related to fashion, it can be a difficult and cost-intensive industry position to achieve.

Therefore, if a fashion company is to use a focus strategy of implementing sustainability within its entire business, it will require a great effort to overcome technological and economic limitations (Lehmann et al., 2019, p. 1). Due to the implications of obtaining a focus strategy, the generic strategy of differentiation is another possibility for a fashion company to create a defensible, less vulnerable position in the industry.

Differentiation through sustainability can be argued to provide a company with an opportunity of creating perceived uniqueness from those businesses that are not working with it. Furthermore, it can create perceived uniqueness if approaching it from a different angle or perspective than those that have already implemented sustainable initiatives, for example through increased transparency.

According to Hooley et al. (2017), in order to create a defensible position within a given market it is essential to have unique and valued products to offer to customers made from a use of valuable organizational resources (p. 254). In that regard, sustainability could be used as a way for a fashion

67 company to employ product and brand value, as it is far from all fashion companies that are practicing sustainability. Furthermore, from the survey conducted for this thesis, it appeared that the majority of respondents have an interest in sustainability in general. Also, in terms of fashion an interest in sustainability has been identified to exist. For instance, more than 90 percent find it important that fashion companies implement sustainable initiatives and more than 80 percent state that they would like to increase their sustainable consumption behavior in terms of fashion (Appendix 8, Q11 & Q18).

With that in mind, it can be argued that there exists a willingness towards consuming sustainable fashion. Hence, sustainable implementations can add value to a fashion company in line with those consumer attitudes as the extent of industry participation is low.

5.4.1.2. Differentiation through shared value

Differentiation will entail a trade-off with a low-cost position if the activities required to achieve it are costly, for instance to do research or product, design and material developments (Porter, 1980, p.

38). Nevertheless, a differentiation strategy does not imply that a company can stop focusing on costs, even though it is not the primary strategic target, as successful differentiation will result in a lower price sensitivity from customers (Porter, 1980, pp. 37-38). According to Porter and Kramer (2006),

“No business can solve all of society’s problems or bear the cost of doing so. Instead, each company must select issues that intersect with its particular business” (p. 84). In that regard, the concept of

‘shared value’ is presented as what businesses should strive towards creating when deciding on how to implement initiatives related to sustainability. Shared value is created, when businesses implement policies that are both beneficial to their businesses and to society (Porter & Kramer, 2006, p. 84).

Also, Porter and Kramer (2006) argue that it can be a dangerous path if businesses create societal value at the expense of the business (p. 84). This view is supported by Kirsti Reitan Andersen, as she expresses that a fashion company must be economically sustainable in order to be environmentally and socially sustainable as well (Appendix 2, l. 21-24). Hence, it is suggested that a fashion company considering implementing sustainability should identify what it can actually do in terms of benefitting itself and society to get the best outcome. This can be a matter of identifying which social or environmental areas it affects and then consider if it can be beneficial to its business to implement initiatives within those areas. For instance, these areas can be found within a fashion company’s value chain, as a business’ value chain affects societal issues (Porter & Kramer, 2011, p. 68). A value chain is what describes an organization’s activities taking part in creating value of it and its products. These

68 activities constitute the process that creates value in the sense that each activity can add value to a product and assist in creating a competitive advantage for an organization (Henry, 2011, p. 107).

A company’s value chain has the purpose of adding value to a company’s final outputs (Hooley et al., 2017, p. 116). One example of shared value creation within a fashion value chain could be to choose more sustainable suppliers in relation to the selection of materials or working conditions at production factories. This creates value for society in multiple ways. The elimination of harmful chemicals can for instance both lower a fashion company’s environmental footprint, as well as it can create safer working conditions for the people working at the production factories. In regard to eliminating harmful chemicals, different certificates can be used to guarantee that for the end-user, for instance the STANDARD 100 by OEKO-TEX (Lehmann et al., 2018, p. 44). The STANDARD 100 by OEKO-TEX certifies that any piece of clothing equipped with it has had all its components tested for harmful substances and chemicals and does not contain any of such (OEKO-TEX, 2020).

As previously mentioned, this specific certificate has been achieved by COZE AARHUS and for that Marianne Spanggaard emphasizes that a benefit of not using harmful chemicals is that it prevents consumers from absorbing them through their clothes (Appendix 1, l. 29-30). With that in mind, shared value can be created in the sense that an elimination of harmful chemicals creates societal value for the consumers, workers and the environment, and in regard to value for the company sustainable initiatives can lead to an enhancement of a company’s brand reputation (Hooley et al., 2017, p. 471). Having a strong reputation can result in consumers accepting and supporting a company, potentially leading consumers to choosing the company instead of another (Cornelissen, 2017, p. 84). In fact, according to Hooley et al. (2017), the reputation of a company or its brand is one its most defensible assets if it is managed well and protected (p. 254). Hence, obtaining a good reputation can both create value for society and the company itself if.

Another example of how shared value can be created is by replacing elements in a company’s operations with others of less environmental impact. For instance, the online fashion platform ASOS replaced its electric light bulbs with low-carbon LED in one of its warehouses and that led to a reduction of its annual carbon emissions, as well as it led to a reduction of its electricity consumption (Lehmann et al., 2018, p. 46). It contributes to the societal challenge concerning the 8 percent of global greenhouse gas emissions coming from global footwear and clothing production (United

69 Nations, 2019). Furthermore, it can reduce the company's electricity consumption which in the long-term can be cost-efficient for the business. Hence, it creates both societal value and business value.