In this assignment, you are to use the same corporation you selected and focused on for Assignments 1, 2, and 3. ( THE COMPANY IS AMERICAN EAGLE)Consider the corporation you have selected to use in yo

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Week 6 Assignment 2

Week 6 Assignment 2

American Eagle Outfitters is the international company dissected in this paper. The student intrinsically identifies the various general environments affecting the company, forces of competition, future improvements for the company, external threats, opportunities, strengths and weaknesses, strategies, and resources, capabilities, and core competencies relating to American Eagle Outfitters.

American Eagle Outfitters being a multinational company, is right in the middle of influential environmental factors. However, the two most dominant segments of the global environment have played a significant role in the direction, success, and trajectory of American Eagle Outfitters. The political and economic factors have had the most recognizable influence on American Eagle Outfitters. The specifics of each segment are discussed below.

Political Factors

The political factors affecting American Eagle Outfitters are quite adverse. It is important to note that political factors affecting AEO do not only apply to the host country. Political factors affecting business partners to American Eagle Outfitters may also have a lasting effect on AEO. The political elements of the global environment should be carefully considered by American Eagle Outfitters should be dissected and looked at intricately before making any investment or market entry. American Eagle Outfitters has faced trade barriers in countries like China. China imposes tariffs on the imports getting into their country. However, American Eagle Outfitters is looking for a way to bypass China's tariffs by partnering with other vendors and diversifying its geographic production. American Eagle Outfitters is subject to taxes from multiple jurisdictions e.g., the United States (American Eagle Outfitters Reports Record Fourth Quarter and Fiscal year sales). The result of U.S. tax legislation i.e., Tax Cuts and Jobs Act, has included benefits resulting from other deductions from the fiscal year 2017 (American Eagle Outfitters Reports Record Fourth Quarter and Fiscal year sales). American Eagle Outfitters has their products being manufactured in foreign countries. Hence, American Eagle faces all kinds of regulations from multiple countries, states, local, and federal governments. These regulations are in line with the marketing, product labeling, regulatory testing, customer product and safety requirements, and licensing requirements. American Eagle Outfitters also faces regulations from political groups relating to their employees both locally and globally e.g., the 2002 Sarbanes-Oxley Act, New York Stock Exchange, and the Securities and Exchange Commission (The United States Securities and Exchange Commission, Washington, 2020). Other political factors affecting American Eagle Outfitters include mandatory employee benefits, wage legislation, intellectual property protection, corruption levels, political stability of certain regions, and favored trading partners. Political forces acting on American Eagle Outfitters have adverse effects on their success and profitability.

Economic Factors

Economic factors influencing American Eagle Outfitters offer no assurance on the trajectory of the company. There can be no assurances that consumer spending trends will always remain constant. American Eagle Outfitters is under the plight of influence from local, general, or international economic factors. American Eagle Outfitters is very likely to incur losses or experience huge profits depending on economic factors that impact demand, business climate, and aggregate investment. The rate of GDP growth in a country affects how AEO grows shortly. The interest rates in a country will determine how the citizens are likely to invest or borrow. High-interest rates will mean better growth of American Eagle Outfitters resulting from more investments. An unstable currency will discourage investors from investing in American Eagle Outfitters if they are affiliated with such money. Moreover, the efficient operation of financial markets will influence how American Eagle Outfitters can raise capital and at a fair price (The United States Securities and Exchange Commission, Washington, 2020).

All five forces of competition have some effect on American Eagle Outfitters. However, this section will discuss the threat of new entrants and the bargaining power of buyers. These two forces offer a base to understand how these forces can have a significant impact on American Eagle Outfitters.

The threat of New Entrants

American Eagle Outfitters, as an apparel store, is based in an industry cupped with new entrants into the market. These new entrants have brought innovation and better ways of offering quality clothes to customers. Hence, American Eagle Outfitters is under a lot of pressure to tackle such new entrants into the apparel market. American Eagle Outfitters has lowered its pricing strategy, provide better-valued propositions to customers, and reduce operational costs to keep up with the new competition. Also, American Eagle Outfitters has brought up barriers that are effective in safeguarding its competitive edge (Damron, Melton, Smith, 2016).

Bargaining Power of Buyers.

Customers of clothing products are demanding a lot to buy clothes of good quality at low prices. This has put a lot of pressure on American Eagle Outfitters, who have to include discounts, offers, and satisfy their customer base. The bargaining power of buyers is a denting factor on the profitability of American Eagle Outfitters (Damron, Melton, Smith, 2016). To tackle this, American Eagle Outfitters has created a large customer base all over the world. This reduces the bargaining power of customers compared to a small customer base who can manipulate the prices of American Eagle Outfitters with ease.

Moreover, American Eagle Outfitters is rapidly inventing and innovating better products. Established products allow customers to seek discounts and offers (Damron, Melton, Smith, 2016). Additionally, new products prevent the defection of customers to the competitors of American Eagle Outfitters.

It is essential to note that the Apparel industry is continuously on the rise. Hence, the recommendations that can be made to American Eagle Outfitters have to be innovative and ahead of their competitors. The threat of new entrants should be handled through the domination of suppliers and distribution channels. This is more of instilling barriers to market entry. Since American Eagle Outfitters is a company with strong market roots, they should seek to dominate the supply chain and prevent the new entrants in the market from obtaining the best of products available. Also, buyers' bargaining power can be tackled through the constant development of new products with fixed prices. Buyers will not have the ability to bargain about new products they have little or no knowledge about.

A severe threat to American Eagle Outfitters is new technologies that are developed by market distributors and competitors. Competitors with better production, marketing, and promotion technology pose the danger of capturing American Eagles Outfitters' customer base. Customer base is the lifeline to American Eagle Outfitters’ success. Hence, the competitor with better technology tends to produce better quality products. Customers who are satisfied with American Eagle Outfitters products tend to be loyal to the competition leading to lower revenue for American Eagle Outfitters (Damron, Melton, Smith, 2016). This threat can be tackled by American Eagle Outfitters implementing technology in their organization. For example, a digitized distribution network would efficiently capture a large customer base leading to increased revenue for American Eagle Outfitters. Another threat to American Eagle Outfitters is environmental regulations. For example, the Paris agreement in 2016 is a threat to American Eagle Outfitters in that particular market segment. However, this threat does not have a significant impact on the company's overall trajectory (Hitt, Ireland, Hoskisson, 2020).

A significant opportunity for American Eagle Outfitters is the government free trade agreement. As opposed to other opportunities like a better taxation policy, stable cash flow for the company, or an increase in customer spending, the chance of free trade agreement opens up better doors for the company. Free trade allows the company to source resources at lower prices i.e., low importation costs, venturing into better market segments, etc. American Eagle Outfitters could use the free trade agreement to massive source amounts of resources and raw materials at lower importation costs or venture into new markets for an increased customer base. This opportunity is excellent for the company because it will reduce the losses from low-cost imports as well as increase the revenue for American Eagle Outfitters through the increased customer base.

The automation of activities at American Eagle Outfitters has brought a lot of consistency to the company. By improving the product according to customer specifications, American Eagle Outfitters can generate consistent products that keep customers happy. However, American Eagle Outfitters has the weakness of inadequate investment in research. This makes the company lag behind the competition, which is spearheading innovation. Automation of the companies activities has allowed the company to scale up or scale down production according to demand. Automation prevents unnecessary loss of products. On the other hand, lack of investment in research precludes the company from capturing a niche customer base that looks for the best and new products in the market (Hitt, Ireland, Hoskisson, 2020).

Strategy or Tactic

Automated activities and production processes at American Eagle Outfitters can be improved through the integration of operations, specialization of services, or simultaneous services. Simultaneous operations will reduce the overall total processing time for American Eagle Outfitters. Combining activities helps link workstations together hence reducing the number of machines needed to complete a task. While specialization of operations helps improve the efficiency of the production process at American Eagle Outfitters. Such changes to the automation process at American Eagle Outfitters help reduce operational costs for the company.

On the other hand, American Eagle Outfitters must address the lack of innovation for the company. American Eagle Outfitters being a mature company in the market, prefers to invest in products based on already tested features in the market. American Eagle Outfitters should look to research marketing, business plan, and the company’s strategy. This will help American Eagle Outfitters acquire new product lines and lead to increased productivity (Damron, Melton, Smith, 2016).

American Eagle Outfitters has a strong supplier base. With a reliable supplier base, the company can overcome the supply chain complications common in the particular market segment. Being an experienced company, American Eagle Outfitters has acquired secure distribution channels that have helped the company remain ahead of the competition. American Eagle Outfitters is capable of efficient new market entry. Over the years, the company has built its expertise in the tactic. This has enabled d the company to diversify its economic cycle and strengthen its revenue stream. High customer satisfaction by American Eagle Outfitters has enabled the company to improve its grip on the competition. Customer satisfaction is a competency that has allowed the company to grasp potential customers to become loyal to American Eagle Outfitters (Damron, Melton, Smith, 2016).

1. Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and Cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning https://shabbiroffice.files.wordpress.com/2017/01/strategic-managment-concept-and-case-by-hitt.pdf

2. American Eagle Outfitters Reports Record Fourth Quarter and Fiscal year sales (2018). AEO Investor Relations http://investors.ae.com/news-releases/news-releases-details/2018/American-Eagle-Outfitters-Reports-Record-Fourth-Quarter-and-Fiscal-Year-Sales/default.aspx

3. The United States Securities and Exchange Commission, Washington, 2020. American Eagle Outfitters Inc For the Fiscal year ended January 28, 2017, https://www.sec.gov/Archives/edgar/data/919012/000156459017003969/aeo-10k_20170128.htm

4. Damron, T., Melton, A., & Smith, A. D. (2016). Collaborative and ethical considerations in the vendor selection process. International Journal of Process Management and Benchmarking, 6(3), 404-418.