External Analysis

External Analysis

1) Economic Forces

There are several economic forces that have an affect on the company. Fist of all, the retail industry is very dependent on the strength of the economy. In a strong economy sales are good, as the primary purchases are from disposable income. The current economy is strong with low un-employment, which would be a good sign for the entire industry. However, spending habits are changing, where apparel industry does not have as high priority on the spending. However the trend is changing away from the conspicuous consumptions of the 80's. People have more disposable income in general then before, but at the same time, many people are getting into personal bankruptcy. The changes in the economy have forced many companies to chapter 11. The economic forces are probably one of the most important external factors for the company's success.

2) Social, Cultural, Demographic and Environmental Forces

There is a shift towards more casual clothing at the work force. Customers do also want to see more selection in the retail stores. This could be very dangerous to companies, as it would require more inventories. Keeping a high level of inventory in store is not good for companies like the Limited group as most of its merchandise is driven by fashion and fads. There is an increase in baby-boomers that will be looking for clothing. This is a huge market, and it is not really being dominated by anyone. This creates a need for apparel targeted for people in their fifties. Another demographical aspect is that the gap between rich and poor is getting higher. In the long run, this can mean that the most successful companies are those who are selling on cheap price or at high-end, with little room for people in the middle. Globalization results in that people are more exposed to foreign trends which ads more competition and requirements to the market.

3) Political, Governmental and Legal Forces

The third variable is dealing with political, Governmental and Legal forces. These forces do not affect the apparel industry. Doing business on the Internet will increase some of the legal forces as the market becomes more complex.

4) Technological Forces

The Limited Group is very driven by technology. A lot of the future business will be taking place over the Internet. The web site of Victoria Secrets was launched in 1998. Also, the internal system used by the group for inventory stock-up is far superior to most of its competitors in the market. All stores are checked fro inventory on a daily basis, and then new products are manufactured and delivered to satisfy those needs. A high demand of a certain product will trigger more production of that product in the Far East next day. Also, because the Limited are in such a competitive