A market entry strategy for Pierre Robert Group in Denmark

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CBS/EXECUTIVE MBA 2009/10
A market entry strategy for Pierre Robert Group
in Denmark
Integrated Strategy Project
Thomas Blomqvist
4/11/2010

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Contents
Contents.................................................................................................................................................2
Executive Summary ..............................................................................................................................5
1.0 Introduction.....................................................................................................................................6
1.1 Problem Definition......................................................................................................................6
1.2 Methodology ...............................................................................................................................6
1.3 Delimitations ...............................................................................................................................6
1.4 Market Definition........................................................................................................................6
2.0 Pierre Robert Group in brief............................................................................................................7
2.1 Presentation of Pierre Robert Group (PRG)................................................................................7
2.2 The organization..........................................................................................................................7
2.3 The product portfolio ..................................................................................................................7
3.0 Industry Analysis.............................................................................................................................7
3.1 The underwear, socks and tights market .....................................................................................7
3.1.1 Market size and consumption...............................................................................................7
3.1.2 Total accessible market ........................................................................................................8
3.1.3 Future growth.......................................................................................................................8
3.2 Players and business system........................................................................................................8
3.2.1 Players and business system.................................................................................................8
3.3 Industry attractiveness.................................................................................................................9
3.3.1 Political impact.....................................................................................................................9
3.3.2 Macroeconomic impact........................................................................................................9
3.3.3 Socio cultural and technological impact ............................................................................10
3.3.4 Conclusion PEST Analysis ................................................................................................10
3.3.5 Bargaining power of buyers ...............................................................................................11
3.3.6 Bargaining power of suppliers ...........................................................................................11
3.3.7 Threat of new entrants........................................................................................................11
3.3.8 Threat of substitutes ...........................................................................................................12
3.3.9 Rivalry among existing firms.............................................................................................12
3.3.10 Structures within the industry ..........................................................................................12
3.3.11 Conclusion Porters 5-Forces and the internal industry analysis. .....................................18
3.4 Key success factors ...................................................................................................................19
3.4.1 Medium to high priced fashion trade chains & wholesalers ..............................................19
3.4.2 Low priced fashion retailers...............................................................................................20
3.4.3 High priced suppliers .........................................................................................................20
3.4.4 Low priced suppliers ..........................................................................................................20
3.4.5 Low priced grocery retailers ..............................................................................................20
3.5 Opportunities and Threats .........................................................................................................21
3.5.1 Opportunities......................................................................................................................21
3.5.2 Threats................................................................................................................................21
4.0 Company Analysis ........................................................................................................................22
4.1 Pierre Robert, a company within the business unit Orkla Brands.............................................22
4.2 Vision, Mission, Goal and Values of the company...................................................................23
4.3 Market Position.........................................................................................................................23
4.3.1 Market share.......................................................................................................................23
4.3.2 Distribution channels..........................................................................................................24
4.3.3 Change in market share......................................................................................................24
4.3.4 Company Image .................................................................................................................25
4.3.5 Profitability.........................................................................................................................25

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4.3.6 Sub conclusion ...................................................................................................................26
4.4 Market Offer..............................................................................................................................26
4.4.1 Scope of product range.......................................................................................................26
4.4.2 Depth and scope of product range......................................................................................27
4.4.3 Quality of products.............................................................................................................29
4.4.4 Design of products and packaging .....................................................................................30
4.4.5 Price levels .........................................................................................................................31
4.4.6 Sales follow up...................................................................................................................31
4.4.7 Product profitability ...........................................................................................................31
4.4.8 Sub conclusion ...................................................................................................................32
4.5 Resources ..................................................................................................................................32
4.5.1 Structures and processes.....................................................................................................32
4.5.2 Company name and brands ................................................................................................33
4.5.3 Marketing and sales competencies.....................................................................................33
4.5.4 Product development competencies...................................................................................34
4.5.5 Production and sourcing competencies..............................................................................35
4.5.6 Management competencies ................................................................................................35
4.5.7 Financial Strength ..............................................................................................................35
4.5.8 Sub conclusion ...................................................................................................................36
4.6 Value Chain analysis.................................................................................................................37
4.6.1 Inbound logistics ................................................................................................................37
4.6.2 Outbound logistics..............................................................................................................37
4.6.3 Marketing, Sales and Service.............................................................................................38
4.6.4 Supporting functions ..........................................................................................................38
4.6.5 Value chain conclusion ......................................................................................................39
4.7 Weaknesses ...............................................................................................................................39
4.7.1 Management and Organization ..........................................................................................39
4.7.2 Operations ..........................................................................................................................39
4.7.3 Finance ...............................................................................................................................39
4.8 Strengths....................................................................................................................................40
4.8.1 Management and Organization ..........................................................................................40
4.8.2 Operations ..........................................................................................................................40
4.8.3 Finance ...............................................................................................................................40
4.9 Company Analysis Conclusion .................................................................................................41
5.0 Issue analysis.................................................................................................................................42
5.1 Problem definition.....................................................................................................................42
5.2 Key Success Factors and Key Performance Indicators .............................................................42
5.3 TOWS........................................................................................................................................43
5.4 Issue analysis conclusion ..........................................................................................................44
6.0 Strategic Choice ............................................................................................................................44
6.1 Hypotheses Formulation ...........................................................................................................44
6.2 Hypotheses 1 .............................................................................................................................45
6.2.1 Barriers to success..............................................................................................................45
6.2.2 Conclusion hypotheses 1....................................................................................................45
6.3 Hypotheses 2 .............................................................................................................................46
6.4 Hypotheses 3 .............................................................................................................................49

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6.5 Strategic choice conclusion.......................................................................................................50
6.6 Financial analysis of JBS and HB Textil ..................................................................................51
6.6.1 Profitability.........................................................................................................................51
6.6.2 Liquidity.............................................................................................................................52
6.6.3 Solvency.............................................................................................................................53
6.6.4 Financial Analysis conclusion............................................................................................54
6.7 Valuation of Jbs and HB Textil.................................................................................................54
6.8 Recommendation.......................................................................................................................54
7.0 Implementation..............................................................................................................................55
7.1 Proposing a preservation strategy approach to integration .......................................................55
7.2 Applying a change management perspective and plan for change ...........................................56
7.2.1 Establishing a sense of urgency .........................................................................................56
7.2.2 Securing the powerful stakeholders and forming a guiding coalition................................57
7.2.3 Create a vision for change, and a strategy..........................................................................58
7.3 Implementing change ................................................................................................................59
7.3.1 Communication strategy ....................................................................................................59
7.3.2 Empowering others to act on the vision.............................................................................60
7.3.3 Key performance indicators ...............................................................................................60
7.4 Sustaining change......................................................................................................................61
7.5 Implementation conclusion.......................................................................................................62
8.0 Conclusion.....................................................................................................................................63
References ...........................................................................................................................................65
Appendices..........................................................................................................................................69

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Executive Summary
The board of directors has decided upon a significant growth scenario to be realized within 3 years.
Pierre Robert Group (PRG) has realized that their problem is how to create substantial growth in its
home markets due to their high market penetration rate. As a consequence the board of directors has
decided upon a new growth strategy which is penetrating new markets. The market for underwear,
socks and tights in Denmark is still growing despite the economic downturn. The total market value
of underwear, socks and tights is estimated to be $550 million and it is expected to have a moderate
growth rate the coming 3 year period. 70% of the turnover in the industry in Denmark is generated
from the organized fashion chains and the grocery chains, with a high share of private labels,
making access to these sales channels more difficult. The grocery trade has increased its sales at the
expense of the fashion trade. Their position in Denmark is attractive since they have been able to
increase their market shares significantly on behalf of the fashion trade chains. Jbs and Bjorn Borg
are the major players within the strategic group of high priced suppliers. Despite the economic
downturn, and declining sales, their profitability level is still high, but declining. PRG is a strong
player in Norway and Sweden with high market shares in the grocery trade. PRG focus on key value
drivers as marketing, sales and a service concept, while they outsource other parts of the value
chain. PRGs innovations have become the company’s key tool for creating growth. However, PRGs
key competitive advantages are the service concept and the sales channel they operate in. They
apply different assortment strategies depending on product group, and each strategy, is linked to the
conditions with limited space in the grocery stores. PRG have not sold their products to customers
outside the grocery channel. In order to be in line with the company vision PRG need to strive for a
strong position (top 3) in Denmark. According to the issue analysis PRG would not be able to enter
Denmark on its own and gain the market share and turnover needed. Entering a joint venture is a
viable way of entering Denmark, but it would not create the necessary growth and profitability
within the time frame. This means that an acquisition is the only viable alternative in order to reach
the ambitious growth targets. Jbs is the company that offers the best strategic fit. By acquiring Jbs
PRG would improve its market share and competitive position in Scandinavia, and also remove a
competitor from the market. The acquisition of Jbs would also allow for entering new sales channels
in Denmark as well as in Norway and Sweden. PRG should apply a preservation strategy in its post
acquisition process. By adapting this strategy PRG will be able to learn about the business and its
corporate and national culture, and the new market. However, in order to reach the objectives of the
acquisition it is necessary to create change. Jbs need to respond to the declining sales, the changed
market situation and the new targets set for the company.

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1.0 Introduction
1.1 Problem Definition
Pierre Robert Group (PRG) has experienced substantial growth in present markets and the board of
directors has decided upon a significant growth scenario to be realized within 3 years. PRG has
realized that their problem is how to create substantial growth in its home markets due to their high
market penetration rate. As a consequence they have decided upon a new growth strategy which is
penetrating new markets. PRG targets the Scandinavian woman and their vision is strongly linked to
Scandinavia as their home market. PRG is not present in Denmark why the company has addressed
the need of a full market entry strategy for Pierre Robert in Denmark.
The problem phrased as a question:
What can be done in a 3 year period in order to achieve a position among the top 3 players in the
Danish market, and an EBITA margin of minimum 15%?
1.2 Methodology
This thesis takes the industry dynamics perspective. Based on the industry structure, and the
attractiveness of the industry, an issue analysis will be carried out followed by the implementation
plan. The choice of models has been done accordingly. This report relies on official published
national statistics, consumer panel data from Gfk in Sweden and Norway, data provided by
Datamonitor, Retail Institute of Scandinavia and interviews. Most of the accessible data are from
2004 to 2008. Where no data have been available estimates are done. Estimates are validated by
comparing the data with similar market data from Norway and Sweden. The industry value is
calculated at retail selling prices, and includes taxes.
1.3 Delimitations
Certain delimitations evident in this thesis should be taken into account. In the implementation part
this thesis will focus on the post-acquisition process at the company level. It will specifically look
into what needs to be done in terms of leadership and how to manage change in order to ensure
success in the process. This is more interesting since M&As are neither the area of PRG, nor the
area of the business unit Orkla Brands. All M&As are handled at the corporate level, and I cannot
influence on how M&As are done within Orkla. The thesis will only focus on the Danish market.
Entry in other markets has not been taken into consideration.
1.4 Market Definition
The apparel and underwear industry that sells underwear, socks and tights for ladies and men.

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2.0 Pierre Robert Group in brief
2.1 Presentation of Pierre Robert Group (PRG)
PRG is today the leading Nordic apparel provider selling exclusively in the grocery channel. PRG
focuses on tights, underwear and socks. The company is a market leader in Sweden and Norway Gfk
(2009), and sells only branded products. PRG has a Nordic concept with a centralized product and
marketing unit and a common logistic system. The assortment is designed in-house and the products
are mostly produced in the Far East and Italy. Sales and distribution is handled locally. The
company has its own sales and distribution force that orders, manages, and refills the grocery stores’
apparel shelves. PRG serves more than 4500 grocery stores in Norway and Sweden and had a
turnover of $73,5 million and EBITA of $14,2 million in 2009 annual report (2009). Pierre Robert
Group is owned by the Norwegian conglomerate Orkla.
2.2 The organization
The company employs approximately 155 staff members and its headquarters are located in Oslo,
Norway. The company group has several Nordic functions as marketing, logistics and buying. Sales,
finance and marketing is to some extent handled locally.
2.3 The product portfolio
The company operates with a two brand strategy, Pierre Robert and La Mote www.pierrerobert.no
(2010). The Pierre Robert collection is available for women, men and children. The Pierre Robert
brand consists of underwear, socks and tights of high quality. The La Mote assortment is large and
varied offering a wide variety of more basic design and quality for women, men and children.
3.0 Industry Analysis
3.1 The underwear,socks and tights market
3.1.1 Market size and consumption
The market for underwear, socks and tights has experienced a CAGR of +8,6% 2005-2008 and
reached a total value of $550 million in 2008 Danske Statistikker (2010). The growth rate is 4,9%-
points higher than the development of the total apparel market which experienced a CAGR of 3,7%
Datamonitor (2009). Ladies underwear has experienced a strong growth, a CAGR of 7,7%, and
reached a total market value in 2008 of $180 million1.The same figures for men’s underwear are a
1 Detailed figures provided in appendix 1 (table 1).

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CAGR of +10,9%, and a total market value of $110 million. The sales of tights has also
experienced a very strong growth, a CAGR of +18,3% Danske Statistikker (2010), in comparison
with the total apparel sales. The total value of the category in 2008 was $110 million2. The sales of
socks has a CAGR of 5,7% which is less than the other categories, but still high in comparison with
total apparel sales.
3.1.2 Total accessible market
A majority of the retailers such as HM, Femilet and Change of Scandinavia exclusively sell their
own brands, private labels (PL). As a consequence the accessible market in different sales channels
is approximately $289 million or 52% of the total market for underwear, socks and tights 20083.
3.1.3 Future growth
According to Datmonitor (2009) the total market is predicted to continue to grow, although at a
slower pace. Yet in reality, the sales of apparel have declined during 2009 and 2010 Danske
Statistikker (2010), which might reflect the economic slowdown. However, since the market of
underwear, socks, and tights have experienced a much stronger growth, in comparison with apparel,
is likely that these product groups will continue to grow. The compound annual growth rate of the
underwear, socks and tights in the period of 2010 – 2012 is predicted to be 2,1%.
3.2 Players and businesssystem
3.2.1 Players and business system
The industry players are the retailers in the market. Retail Institute of Scandinavia (2010) suggests
that the Key suppliers in the industry are clothing companies and wholesalers, with retailers able to
source from both. According to Hillmose (2010) the key suppliers of underwear, socks and tights are
Triumph, SOS Sportswear (Bjorn Borg), JBS and HB Textil. Triumph has integrated forward and
run their own brand stores in combination with sales to independent stores. Bjorn Borg has not
progressed in the way they have in Sweden and Norway (Bjorn Borg, 2009). Table 1 show that the
grocery trade has a significant share of the total market in Denmark. It is a fragmented industry
where the market consists of approximately 70 different retail chains with 2107 stores, 2200
specialty/other stores, as well as most of the 2800 grocery stores in Denmark.
2 Detailed figures provided in appendix 1 (table 2)
3 Retail Institute Scandinavia (2010). Details of calculation are given in appendix 2.

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Table 1 – Major players and distribution channels in the market 2008
3.3 Industry attractiveness
3.3.1 Political impact
Quotas on apparel and textile items were regulated by the WTO agreement on Textiles and Clothing
www.jureka.net (2010). It regulated the import by setting quantitative limits on imports in order to
protect firms in developed countries from a flood of low cost imports. The agreement required a
gradual phase out of quota restrictions. In 2005 the quotas were eliminated with the exception of
imports from China. But these quotas were eliminated from the 1st of January 2009 and there are no
indications of any new regulations in the area. However, import taxes still exist and when it
concerns underwear imported from China the tax is currently 12%. But according to Wallén (2010)
the costs of import taxes on underwear from China are negligible in comparison with the cost of
buying the products from suppliers in Europe. The VAT in Denmark is currently 25%.
3.3.2 Macroeconomic impact
Both the total apparel market and the underwear market has grown during 2005-2008, with a CAGR
of 3,7%, and 8,6% respectively. However, according to Danske Statistikker (2010) the apparel
industry has experienced a decline in sales in 2009, and 2010 in Denmark. According to
www.wikiinvest.com (2009) the apparel industry is highly cyclical and heavily dependent upon the
overall level of consumer spending. Purchases of apparel and related goods tend to be highly
correlated with changes in the disposable income of consumers. As a result, the sales of apparel
have dropped. An interesting observation is the major shift in sales per channel in Denmark. Table 1
(page 10) shows a significant increase in sales for the grocery channel, while sales in the fashion
trade has declined. This could be an effect of changed consumer behavior due to less money to
spend.

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3.3.3 Socio cultural and technological impact
Consumers are more sophisticated and more demanding than before. This is not something that is
unique for the Danish market but for the western world as a whole. As a consequence the collections
that used to be released twice a year are almost nonexistent in companies such as HM, Zara and
other large retail chains. As a response to changed consumer behaviors large and small players in the
market are now releasing their collections continuously and have less focus on seasonal collections
www.bjornborg.com (2009) and annual report HM (2009). This of course increases the risk of being
too late on the market, while it at the same time decrease the life span of the products. Each
company’s ability to adapt to the new market conditions, predict future trends, and change current
supply chain strategy will be crucial. If not, large values are at stake when products are launched
without fulfilling the consumer needs Miller (2006).
According to Scardino (2010) large retailers, such as Wal-Mart, Target and Sears believe that
technology will continue to influence apparel in the future. Consumers are expected to have an
increasingly higher expectation of comfort, why new materials with different attributes will continue
to grow in importance. The consumers also pay more attention to the environment, and the way
products are produced. Factors as “friendly to the environment”, produced close to the selling
market and/or produced in a safe and sound conditions are expected to affect future consumer
behavior. Alongside this, the “plus market” is another rapidly growing trend in the western world
Scardino (2010).
3.3.4 ConclusionPEST Analysis
The political impact on the industry is low. According to Wallén (2010) the costs of import taxes on
underwear from China are negligible in comparison with the cost of buying the products from
suppliers in Europe. The quotas are eliminated and there are no indications of any new regulations in
the area. The global economic situation has affected the apparel sales negatively, which show that
purchases of apparel tend to be highly correlated with changes in the disposable income of
consumers. However, the sales of underwear, socks and tights are still growing, but at a slower pace.
An interesting observation is that there has been a major shift in sales per channel. The grocery trade
has increased its sales at the expense of the fashion trade. Consumer demands have had a major
impact on the industry and its supply chain. Collections are nowadays released continuously with
much shorter lead times, which increase the risk of being late on market. To be able to release new
products continuously, the companies need to invest more time in product development, and invest
in activities that make the supply chain more efficient. The socio and technological impact on the
industry is believed to increase in the future due to more demanding consumers, and the intense

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growth of plus-size apparel. My conclusion is that the industry is attractive, and the socio and
technological impact on the industry is a key driver for change.
3.3.5 Bargaining power of buyers
Hillmose (2010) suggests that all retail chains in Denmark have centralized their decision making
regarding which assortment their stores are supposed to work with. This also applies to the grocery
chains Söndrup (2010), Codam (2010). However, the specialty stores operate independently which
to some extent hampers the buyer power in the industry. Approximately 70% of the turnover in the
industry is generated from the organized fashion chains and grocery chains with a high share of their
own brands in their assortment; this makes access to these sales channels more difficult. The cost of
switching suppliers in the industry is low since it is low cost products with a short shelf life. My
conclusion is that the buyer power is high.
3.3.6 Bargaining power of suppliers
The apparel industry is characterized by a large number of suppliers in the world, low
differentiation, and low cost products. The cost of switching suppliers is low Vestad (2010).
According to Jobber (2007) these characteristics suggest that the bargaining power of suppliers is
low. Porter (1998) argue that the risk of having powerful suppliers in an industry is that they are in a
position where they can raise the prices, or reduce quality of purchased goods, and subsequently
squeeze profitability out of an industry. Porters reasoning support my conclusion that the bargaining
power of suppliers in the industry is low.
3.3.7 Threat of new entrants
According to Retail Institute Scandinavia (2010) the apparel and underwear industry is relatively
easy to enter in Denmark, but the total accessible market is only 52%4, which reduce the possibility
of achieving economies of scale, and thereby increase the barrier of entry.
The grocery chains have significantly increased their market shares from 31% in value to 40%5 of
the total sales of underwear, socks and tights. The large change reduces the market accessibility,
which further increases the entry barriers.
Conclusion: The threat of new entrants is high, but it is difficult to achieve economies of scale,
since access to distribution in the major sales channels is limited.
4 The calculation is provided in appendix 2.
5 The calculation and sales per channel is provided in appendix 1 (table 5).

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3.3.8 Threat of substitutes
According to Porter (1998) substitutes are products that can perform the same function as the
products of the industry. Within underwear there are few substitutes, while the substitutes for tights
are pants, or socks. Porter (1998) argues that substitute products that need the most attention are
those that improve the price-performance tradeoff, in comparison with current products in the
market, or are produced in industries earning high profits. As I see it neither of these alternatives are
valid in the underwear, socks, and tights industry. The threat of substitutes is more about shifting
trends and changed consumer behavior as trading down or up, i.e. buying cheaper or more expensive
products. The Swedish underwear market has increased because of the consumers’ willingness to
spend more money per item (Gfk Norge, 2004-2008), and the same trend has been observed in
Norway (Gfk Consumer Tracking, 2004-2008).
Conclusion: The threat of substitutes is low.
3.3.9 Rivalry among existing firms
Table 1 shows a market, with multiple sales channels, and a large number of players. In order to win
the consumer the industry applies different tactics as price competition, advertising battles, constant
renewal of products www.lindex.dk (2010), www.hm.com (2010). The total market has experienced
strong growth, but it is the grocery chains that have driven the growth. The grocery trade is
aggressive when it comes to frequency of in-store campaigns and size of price deductions
www.coop.dk (2010), www.bilka.dk (2010). The large market share of the grocery trade,
approximately 40% of the total sales, indicates high volumes and low prices, which puts pressure on
the profitability in the industry (Porter, 1998). Further on the degree of differentiation is low, with
the exception of branding and design.
Conclusion: The interacting characteristics above support the conclusion that the rivalry in the
industry is high.
3.3.10 Structures withinthe industry
In most industries competitors can be allocated to strategic groups, based on similarities in their
competitive position Kühn (2008), Porter (2008). By analyzing these groups we are able to see
which competitive positions are more attractive than others. Hillmose (2010) argue that location,
and the price/quality dimensions are the most competitive dimensions in the industry. I partly agree
but location seems more connected to the fashion chains, instead of the whole industry. I have
chosen the distribution channel instead since it has proven to be an important factor behind the

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success of the grocery channels. According to Porter (2008) the distribution channel and
price/quality dimension are also both linked to important barriers to mobility and entry.
Figure 1 – Strategic Groups in the low to high priced apparel industry6
Source: GFK Denmark 2008, annual reports 2009, and Hillmose (2010)
3.3.10.1 Medium to high priced fashion trade chains & wholesalers
Significant for this strategic group is the forward integration. They all run their own stores in
addition to their whole sale operation. By integrating forward they exclude competing suppliers in-
store, improves their ability to reach end customers and it also gives better access to information
about end customers www.moneyterms.co.uk (2010). The assortment and the display are in full
control by the company itself. By applying the concept of running their own stores, or stores on a
franchise basis, in combination with wholesale, they are less dependent on sales and distribution to
other customers. It also increases the visibility of the brand, and most important increases the
volumes in order to achieve economies of scale. The threat to this group is the expansion of the
grocery trade. If they “trade up”, i.e. sell products with higher quality at a competitive price,
attracting consumers away from the fashion trade chains. Another threat is the profitability of the
franchise stores. If the franchisees are not as profitable as expected the chain will struggle to
maintain the existent owners and attract new ones. The high priced suppliers have so far not chosen
to integrate forward in Denmark, which is the case in Sweden and Norway. When analyzing the
growth rate and the level of profitability, Change and Femilet have a positive CAGR +20,8%, and
+2,6% respectively, while the players in the other strategic group have a negative CAGR. On the
other hand, figure 2 shows that neither Change, nor Femilet are profitable, while Bjorn Borg and Jbs
are profitable. It is likely that this strategic group will continue to focus on establishing franchise
6 Only largest players in the market are included.

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stores in Denmark and other countries, in order to avoid the future threats, achieve economies of
scale and enable continued expansion.
Description of the companies within the strategic group
According to www.triumph.com (2010) Triumph International is one of the leading underwear
suppliers in the world and their Scandinavian headquarter is based in Denmark. The company have
market share in value of 29,7% (Gfk, 2009). They offer a wide assortment from the finest lingerie to
high performance, functional underwear under different brands such as Sloggi and Triumph. They
also offer products for men under the Sloggi and HOM brand. Triumph adopts a multi channel sales
strategy including sales through their own stores. According to the E-commerce director of
Triumph, (personal contact, 4th of May), the brand Sloggi is mainly sold through the grocery trade,
while the Triumph brand is designated to the fashion retail stores. The Scandinavian business
handles the sales and marketing part in the value chain. The assortment is designed at company
headquarters, and produced in their own factories in Germany, Austria, China and India. The annual
report 2009 show that the revenues of the Scandinavian business have decreased with -8%, from
$124,6 million to $114,6 million in 2009 and the CAGR the latest 3 years is -4,3%, figure 2. The
EBITA in 2008 and 2009 were $-12,8 million, and $-12,2 million respectively.
Change of Scandinavia offers a wide assortment of lingerie at different price levels
www.change.com (2010). They design the products on their own, and produce all it in their own
factories in China Change applies a franchise concept which has enabled them to expand rapidly.
Today Change of Scandinavia operates through more than 100 franchise stores spread around the
world, and they sell their products to retailers in more than 20 countries, i.e. operates on a wholesale
basis. Figure 2 shows a strong CAGR, +20,8%, which is significantly more than the other players in
the market. However their annual report show that their EBITA ended -8,0%, $-4,1 million in 2009.
Femilet focus on design, sales, and marketing of fashion lingerie in Denmark. The production is
outsourced to the Far East. They run 28 concept stores and 40 shop-in-shops where their own brands
are sold www.femilet.dk (2010). They sell two external brands, Hudson socks and Wolford tights. In
addition to their own stores they have approximately 500 wholesale customers. Their annual report
show that the revenues in 2009 ended $24,9 million, a decrease with -4,4% compared with the year
before. Figure 2 show a modest 3 year CAGR of +2,6%, and negative profit margin in 2009.
3.3.10.2 Low priced fashion retailers
EuroMonitor (2009) suggests that fast product turnaround, flexibility, and speed to market are
significant for this strategic group. Their positioning, based on low-priced fast fashion, enables them

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to appeal to a wide range of consumers and protect them from attack by other strategic groups. Their
fast fashion business model also gives them the flexibility to change collections rapidly and to adapt
to consumer tastes. International presence and rapid international expansion has also been a major
part in driving sales of players in this strategic group www.hm.com (2009). The threat to this group
is the grocery channel with players such as Coop and Dansk Supermarked in the lower price/quality
segment. This strategic group do not seem to have any other strategic directions, however HM
recently acquired Company Fabric, a fashion retailer with two different store concepts, Monkey and
Weekday. Even if this is a very small business within HM today, the direction is the fashion retail,
but in the mid price segment.
3.3.10.3 High priced suppliers
Significant for this strategic group is a strong focus on product development, consumer
communication and distribution www.bjornborg.com (2010). Their level of profitability in
comparison with the other groups is significantly higher. To a certain degree this strategic group is
protected against competition from the other groups as long as they are able to maintain high brand
equity, high consumer loyalty, a constant focus on product development and a high distribution
level. Each company in the strategic group has the same target group; they are strong in mens
underwear, and the products are sold in the same sales channel. As figure 1 show it seems that these
two suppliers are moving towards the group with cheaper products. “Multipack offers” are
frequently used by retailers to further increase the volumes in the lower price segments. That Jbs and
Bjorn Borg have started to work with 2 and 3-packs with discounted prices support the move
towards the other group. Jbs as a company is also present in a second strategic group with two price
oriented brands sold in the grocery channel.
The threat to this group is the expansion of the grocery channel. Codam (2010) argue that in recent
years the grocery channel has focused on running campaigns on underwear from well known brands
such as Adidas, Boss and Champion. Low prices on branded products attract the consumers, which
may harm the brand loyalty to Bjorn Borg and Jbs. A second threat to this strategic group is the
dependency on achieving a high distribution level. Lower distribution levels, i.e. fewer stores
running their assortment, would harm the sales and profitability.
SOS Distribution Network (SOS) is the exclusive distributor of Bjorn Borg underwear in
Denmark. Their turnover in 2009 were approximately $14,9 million7, a decrease with -19,9%
7 Approximation based on sales- and gross profit level 2007.

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(Bureau van Dijk, 2010). In two years the sales have dropped by 31%. Still the company shows a
profit margin among the best in the market, figure 2. According to www.evb.dk (2007), SOS
operates with a tight organization, approximately 10 people, which is the major reason behind the
profit level. The brand Bjorn Borg offers a wide range of underwear for men and women. The
assortment is sold through approximately 800 stores within the fashion trade chains, specialty stores
and internet stores. Products are not sold to any customers outside these channels. The company
behind the brand, Bjorn Borg AB, has 3 strategic focus areas, product development, consumer
communication and distribution www.bjornborg.com (2010).
Jbs is one of the leading suppliers of mens underwear in Denmark. In 2008 Jbs acquired Egtved
socks to supplement their market offer, and in September 2010 they acquired the Swedish
underwear supplier Resteröds. They work with a multiple sales channel strategy, and they
differentiate their offer accordingly8. Jbs sell their cheaper brands Marathon, and Olympia to the
customers in the grocery channel, while the Jbs brand is offered to fashion retailers. The strategy
behind the differentiated offer is most likely the prevention of brand dilution. According to
Amaldoss and Jain (2005) it is common that suppliers of premium brands use exclusive channels in
order to restrict availability, build a strong brand identity, and avoid brand dilution. Jbs have their
own design department, and they produce most of the Jbs underwear in their own production
facilities in Lithuania. According to www.jbs.dk (2010) 50% of the total volume is produced in
Lithuania and the rest is produced by suppliers in Turkey, Portugal and Poland. The annual report
show that the revenues in 2008/2009 were on par with the previous year ending at $28,4 million; but
in local currency the sales were down by 1%9. Figure 2 show that Jbs has a negative 3 year CAGR
of -4,8%, but a strong profit margin. The EBITA in 2009 ended +$4,2 million with a EBITA margin
of 14,9%. However, in comparison with 2006 the EBITA level has decreased with 33%. The gross
profit margin of the company was 44,2%, which is significantly lower than the margin of PRG 55%.
3.3.10.4 Low priced suppliers
EuroMonitor (2009) suggests that this strategic group focus on low cost, volume, and less fashion.
Price is a prerequisite for success for the suppliers within this strategic group. This strategic group is
protected against competition from the high priced strategic group since they only operate in the
grocery channel, and have a significant lower price level. They also target other customer groups
than the high priced brands www.hb-textil.dk. Jbs and Bjorn Borg target a younger customer group
8 Source: Store visits in grocery trade, and independent fashion retailers.
9 Revenues are calculated by assuming a gross profit margin of 55%.

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than players in low priced group www.bjornborg.com (2010). The threat to this group is the
expansion of the grocery trade, and further increased sales of private labels Awbi (2006). Another
threat is the low priced fashion chains offering similar products, but a wider range, at approximately
the same prices. HM have a strong position within underwear (Gfk, 2009). They are also most
likely, to be strong within socks and tights as in the other Scandinavian Countries (Gfk Norge, 2004-
2008), but no data substantiate this in Denmark. It is likely that this strategic group in the future will
add services to their offer in order reduce the focus on price. As mentioned before price is a
prerequisite for success, and in order to compete they need to achieve an overall cost leadership
(Porter, 1998). But neither HB Textil, nor Jbs, is in that low-cost position. They operate with low
prices, but the profitability suffers.
HB Textil operates mainly in the grocery channel. According to Hillmose (2010) they provide
services such as merchandising to some of their medium sized customers in the grocery trade.
They also sell private label products to customers in the grocery trade channel, and the independent
fashion trade. HB Textil designs the products, and buys them from different suppliers in the Far East
and Europe. They do not produce anything on their own. Their revenues in 2009 were $34,5 million,
a decrease with -7%, and the 3 year CAGR ended -7,6%, figure 2. Their net profit ended $+0,2
million. The company operated with a gross profit margin of 31%.
3.3.10.5 Low priced grocery retailers
Significant for this strategic group is the focus on volume, lower cost, and low price points. The
customer flow each week to the grocery channel is an advantage to retailers in their ambition to
“sell more to the existing customers in the stores” (Hines & Bruce, 2007). According to Hines and
Bruce (2007), the consumers are more willing to mix the more expensive items with cheaper lower
priced “disposable fashion” purchased at lower price points. As table 1 show the grocery channel
has experienced a significant growth, which has affected the fashion trade. The same phenomena
have been by observed by Hines and Bruce (2007) in England. This strategic group is protected
from competition from the other groups by the number of stores they have. In total the grocery trade
consists of 2800 stores of various sizes and formats. The focus on low price and the large number of
stores also enables them to sell large volumes at low prices and low cost. The strategic group seems
to move in the direction of the high priced suppliers. According Codam (2010) the grocery trade
often offers branded products, at low prices, through their customer magazines. The threat to this
strategic group is that the large retail chains such as HM, and Zara are able to source and sell

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cheaper products with higher quality due to efficient supply chains. Another threat is that their
traditional supply chain process is slow in comparison with the fashion chains, making them less
responsive to changes in demand and fashion.
Neither Coop, nor Dansk Supermarked reports the actual sales, but in 2008 approximately 9% of
sales in the total market of underwear, socks and tights, moved from the fashion trade to the grocery
channel, table 1. Assuming that all retailers in the grocery trade have experienced the same growth,
then the 3 year CAGR would amount to 26,7%, figure 2. Coop as well as Dansk Supermarked
operates through several grocery chains and they run a mix of private label products and supplier
brands. They have their own design and sourcing organizations, but no production of their own.
Products are sourced from suppliers in Denmark and suppliers around the world Söndrup (2010).
The discount chains Netto and Fakta are the only ones that allow external merchandisers from their
textile suppliers. The rest of the chains, within Dansk Supermarked and Coop, handle the apparel
category on their own.
Figure 2 - Compound Annual Growth Rate compared with Net Margin
Source: Company annual reports.
3.3.11 Conclusion Porters 5-Forces and the internal industry analysis.
The intensity of the competition within the industry is magnified by the fact that supplier power is
low in comparison to buyer power. Approximately 70% of the turnover in the industry in Denmark
is generated from the organized fashion chains and the grocery chains, with a high share of their
own brands in their assortment, making access to these sales channels more difficult. Only 52% of
the market is estimated to be accessible from a supplier perspective. Access to major sales channels

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is definitely a barrier to entry in the market. The threat of new entrants is high, but since the
accessibility to distribution is challenging it remains difficult to achieve economies of scale. The
rivalry in the industry is also considered as high. It is a fragmented market where the grocery trade
has a significant share of the total market. According to the internal industry analysis it is the low
priced grocery retailers who are the winners in the market. Their position in Denmark is attractive
since they have been able to move sales from other channels to the grocery trade channel, and gain a
market share of 40%. The profitability is high in the strategic group of low priced fashion chains.
The profitability level is still high in the strategic group of high priced suppliers, but in recent years
they have declined. The assumption is that the profitability of the grocery retailers is high. The
profitability of the medium priced to high priced fashion trade chains is low, however the 3 year
CAGR of the two major players are growing due to expansion of stores in- and outside Denmark.
3.4 Key success factors
According to Hillmose (2010) the general success factors in the industry are:
- The management’s experience of the relevant market.
- Strong relationships with the trade.
- Deep understanding of what products to sell and when.
- God balance between seasonal products, fashionable products and basic items.
- Efficient logistic systems.
- Capital in order to invest in marketing activities.
But, as mentioned these success factors are general and not applicable to each strategic group.
Hence, we need to look at each strategic group in order to define the specific key success factors.
3.4.1 Medium to high pricedfashion trade chains & wholesalers
Based on the industry analysis and company analysis, I suggest the following key success factors for
this strategic group:
- Assortment - wide and in different price ranges, latest designs.
- Forward integration - company owned stores or stores run on franchise basis.
- Distribution - a combination of wholesale and own stores.
- Scale - number of stores and wholesale customers in order to achieve economies of scale.
In addition to these key success factors Hines (2007) also argue that store location, design of the
interior and service are important success factors for this strategic group.

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3.4.2 Low priced fashion retailers
According to Dutta (2004) the major success factors for this strategic group is that the business is
built on quick response, and the production responds to trends. Hines (2007) argue that the
flexibility in production and ability to run shorter product series in combination with a low cost
strategy is their key success factors. If I summarize I suggest the following key success factors:
- Fast product turnaround. - Flexibility in production.
- Speed to market. - Full control of assortment, no external brands.
- Low cost operation, low priced fashion. - High volumes, but short product series.
- Scale, large number of stores.
3.4.3 High priced suppliers
According to www.bjornborg.com (2010) and Hines (2007) the key success factors of this strategic
group are:
- Product development. - High consumer demand, strong brands.
- High investments in marketing. - Distribution.
- Multiple sales channels.
3.4.4 Low priced suppliers
According to the industry analysis the key success factors for this strategic group are:
- Low cost and volume. - Standardized products, less fashion.
- Multiple sales channels. - Distribution.
- Flexible in terms of serving different customer needs.
3.4.5 Low priced groceryretailers
According to Kuhn (2008), and the industry analysis the success factors for grocery retailers are:
- High volumes and low cost. - Low price points.
- Buying power. - Operational efficiency.
Additionally, Grant (2002) argue that convenient location and easy parking are two important
success factors. Even if Kühn (2008) and Grant (2002) success factors concern grocery retailers as a
whole, and not specifically grocery retailers offering textiles, I believe that they are valid. From my
own observations in the stores it is quite obvious that price and volume are important. Campaigns
and multi-pack offers at low prices dominate the space aimed for the textile category which support
their view.

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3.5 Opportunitiesand Threats
3.5.1 Opportunities
3.5.1.1 Economic factors
The market is expected to continue to grow, especially through the strategic group of low priced
grocery retailers and low priced fashion chains.
3.5.1.2 Social factors
The consumers pay more attention to the environment, and the way products are produced. Products
that are perceived as more “friendly to the environment”, produced close to the selling market
and/or produced in a safe and sound environment is expected to grow. Another social factor is the
continued intense growth of “plus size” products in the US market, which are also likely to take a
hold in the western world.
3.5.1.3 Products and Technology
Consumers are more sophisticated and more demanding than before. Healthy, comfortable and/or
technically advanced products are expected to be growing segments in market; i.e., product and
material innovation will be increasingly important and at the same time an opportunity.
3.5.1.4 Markets and Competitive factors
The strong competition in the market may open up for joint ventures, acquisitions, or the need of
other value adding activities in the value chain in order to differentiate and/or improve profitability.
The shift in sales channels, i.e. the significant sales increase of the grocery trade channel, is an
opportunity since the large low price fashion trade chains only sell private labels.
3.5.2 Threats
3.5.2.1 Economic factors
The economic slowdown may change the consumer behaviour, i.e. “trading down” on items, which
may cause pressure on profitability on some of the strategic groups. The low priced grocery channel
and the low priced fashion retail chains might increase their market shares further, on behalf of the
other sales channels.
3.5.2.2 Social factors
The consumers increased awareness of fair trade, climate friendly production and transportation
might increase the cost in several parts of the value chain, and affect “slow movers”, who do not
adjust their offer according to changed consumer demands.

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3.5.2.3 Products and Technology
The technological development puts a higher pressure on players to invest more in innovation and
product development. Innovation and product development is expensive and the failure rate of new
products is high Jobber (2007). Lack of process innovation, as changing from the traditional way of
sourcing to the “fast fashion” way of sourcing may increase the gap between competitors who
succeed and those who do not. Both in terms of cost structure, also in terms of speed to market with
best selling items.
3.5.2.4 Markets and Competitive factors
The market consists of a large number of market players. The winners in the market are the low
priced fashion retailers marketing their own brands as well as the players in the grocery channel that
focus on developing their private labels. There is a risk that the total accessible market will decrease,
and the market for the retail owned brands to increase. This would be a threat to the branded
suppliers in the industry, putting higher pressure on existent suppliers’ profitability, reducing the
possibilities of achieving economies of scale, increase the barriers of entry and further increase the
buyer power in the industry. As the suppliers act in the market today, they operate with different
brands in the grocery channel versus other channels. The choice of selling products to the grocery
channel might disqualify entry into other channels, and it may contribute to the dilution of the brand
(Amaldoss & Jain, 2005).
4.0 Company Analysis
4.1 Pierre Robert, a companywithin the businessunitOrkla Brands
The development of Orkla’s portfolio has resulted in a focus on five business areas: Orkla Brands,
Aluminium Solutions, Materials, Associates and Financial Investments. Orkla Brands consists of
four business units and Pierre Robert Group belongs to Orkla Brands Nordic. According to
www.orkla.com (2010) the goal of Orkla Brands Nordic is to achieve growth both by increasing
revenues in existing business, and through acquisitions. Another important goal for the business unit
is to ensure continuous focus on cost-effectiveness throughout the value chain. The strategy of Orkla
Brands is based on a multi-local model where responsibility for value creation in the core business
rests at the local level with each individual company. The use of strong branded consumer goods is
key to securing consumer loyalty, and revenues on long term basis. Inter-company synergies are
achieved by sharing best practices and common, cost-effective support functions. The following
company analysis will only focus on Pierre Robert Group, and neither issues and/or information on
business unit level, nor corporate level.

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4.2 Vision, Mission, Goal and Valuesof the company
The vision of PRG is “With Brands and Contemporary Design, We Inspire the Scandinavian
Woman Every Day”. The vision incorporates 3 key messages which are:
Building strong brands is a cornerstone in the vision of the company and other businesses within
Orkla. Presence throughout Scandinavia is important in order to continue the strong growth of the
company and the text “inspiring every day” points out the grocery trade in each country as the main
arena for sales. The mission of the company is:
“Pierre Robert Group offers everyday clothing with a contemporary design for women, children and
men. With our knowledge and strong brands, we will on a continuous basis contribute to increased
growth and profit to our customers”. PRG have a clear goal in terms of turnover and EBITA in
2013. According to the strategic plan of PRG the company aims to double its turnover to $178
million, and double its net profit to $35,5 million. Together with representatives from the personnel,
PRG in 2008 prepared and implemented a set of new values into the company. The result from the
co-work showed three “wanted” behaviors, i.e. how do PRG and its personnel want to be. The three
core behaviors were Open, Ambitious and Responsible.
4.3 Market Position
4.3.1 Market share
In Norway the company has a solid number one position in the grocery trade with a market share in
value of 51,1% (Gfk Norge, 2004-2008) and in the total market PRG has value share of 10,7%. The
number two, Lindex have a market share of 9,4% and HM 9,3%. Figure 3a show that PRG has a
strong relative market share in the segment of socks and tights, but a weaker position within
underwear. PRG in Sweden is the major player in the grocery trade with a value share of 30%,
which is equivalent to a market share of 6% in the total market (Gfk, 2009). In Sweden PRG has a
relative market share in each segment of 0,1-0,2%, see figure 3b.
Figure 3a – Rel. market share PRG Norway. Figure 3b – Rel. market share PRG Sweden.
Source: GFK Consumer*Scope Norway 2008 Source: GFK Consumer*Scope Sweden 2009

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4.3.2 Distributionchannels
According to Höienholm (2009) PRG sells their products through the grocery trade channel in
each country. Through central agreements the company is present in all grocery chains in
Norway, approximately 4000 stores. The assortment in each store depends on store size and
profile of the stores. For most of the stores in Norway PRG is the only supplier. The Swedish
subsidiary operates in the same way, but they only have central agreements with 2 out of 4
grocery chains in the market. In total they sell and distribute their products to approximately 1500
stores. PRG sells a narrow assortment to 3 of the major grocery retail chains in Finland. The
products are mostly sold in hypermarkets and not in the medium sized and smaller stores. In
contrast to PRG in Sweden and Norway the products sold to Finland are distributed through each
customer’s central warehouse.
4.3.3 Change in market share
Figure 4a and 4b shows that Pierre Robert Group has increased their market shares in all market
segments in both Sweden and Norway. The market share within socks and underwear has been
growing since 2006 in Norway due to several launches of successful innovations10. According to
Peterson (2010) the increasing market share in Sweden is driven by increased distribution and the
same innovation program as Norway.
Figure 4a – Norway, Value shares Figure 4b – Sweden, Value shares
Source: GFK Consumer*Scope Norway 2008 Source: GFK Consumer*Scope Sweden 2009
10 The innovations are shown in appendix 5.

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4.3.4 Company Image
According to Schea (2009) the company image has changed over the recent years, especially in
Norway. Successful innovations, strong category growth for the trade and the new company
name has contributed to this change. PRG has not conducted any survey, but they were one of
three suppliers that were nominated to the award “Supplier of the year” in the Norwegian grocery
trade in 2009. The same year the company also won the Design Effect price. The prices suggest
that the company image has increased. No surveys have been conducted in Sweden, but it is
likely that the image has improved among both customers and consumers. According to the HR
department they have noticed a significant difference in the number of applications to various
positions in the company, and according to the key account managers, it is easier for them to
book meetings with important customers today compared with 3 years ago. To some extent this
supports the view that it is likely that the company image has improved.
4.3.5 Profitability
PRG has increased its profitability and EBITA margin since 2006. The profit has increased from
$3,1 to 14,2 million in 2009, and the EBITA margin has improved from 13,7% in 2006 to 19,3%
in 2009. Figure 5 shows that the gross profit margin in 2009 is similar to leading retailers in the
market, and that EBITA margin is among the top 3 market players. In comparison with similar
suppliers in Denmark, as HB Textile and JBS, the EBITA margin and level of gross profit is
significantly higher. According to Hamdahl (2010) the main reasons behind the improvement in
EBITA is the sales increase +41,4% in value 2009 in comparison with 2006, whilst the cost only
have increased with 16,9%.
Figure 5 – Benchmark profitability
Source: Annual reports 2009.

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4.3.6 Sub conclusion
PRG are the number one player in the market in Norway. The company only operates through the
grocery channel where its products are fully distributed to approximately 4000 stores. PRG apply
its service concept to all stores in each grocery chain. PRG has a high relative market share
within the segment of socks and tights, and a weaker position within underwear. PRG in Sweden
have a weak position in the total market, but a stronger position within the grocery channel. As in
Norway, PRG in Sweden only operates in the grocery trade channel. PRG is present in Finland,
but only as a minor player in the market. The company image has increased significantly in
Norway, and slightly in Sweden. The profitability of the company is high. The Gross profit
margin of the company is relatively similar with other leading companies while the EBITA
margin is among the top 3.
4.4 Market Offer
4.4.1 Scope of product range
PRG offers a wide range of products within 4 product segments. Underwear, socks, tights and
garments. Each segment offer products for women, children and men. Figure 6 shows the needs
map that PRG implemented in 2005. The needs map categorize different consumer needs, and the
size of each segment. By plotting in the different competitors and products in the map PRG are
able to define potential gaps in the market, and by that plan future innovation projects (Steen,
2010). PRG are present in the segments Everyday, Everyday+, Warm and Robust, and Sporty.
The Pierre Robert brand is present in the Everyday+ and the Sporty segment, while the La Mote
brand is present in the Everyday and Cheap segment.
Figure 6 – Needs Map – The Underwear, Tights and Socks
Source: MMI Norway 2005

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4.4.2 Depth and scope of product range
4.4.2.1 Socks
PRG operates with products within the segments Everyday+, Everyday, Sporty and Warm &
Robust to the whole family. Most of the products are updated every season (twice a year).
A majority of the socks are branded La Mote, while the Pierre Robert brand is used for its wool
socks and Everyday+ socks. Figure 7 shows that the PRG have chosen to focus on width, and not
depth in the assortment. Most of PRGs customers in each country are small stores where the shelf
space is limit, so the assortment strategy is partly based on the needs map, and partly on the size
of stores Peterson (2010). The fashion retailers and the grocery chains offer a wider and deeper
range of products in comparison with PRG. Figure 7 shows that the assortment strategy of HB
Textil is similar to PRG, while Jbs have chosen to focus on depth, instead of width. An
interesting observation is that Jbs only offer socks for men.
Figure 7 – Depth and Scope of socks vs major market players in Denmark.
Source: Store visits, product catalogues of each company and internet.
4.4.2.2.1 Underwear for woman
The underwear assortment of PRG is both narrow and shallow. Figure 6 show that PRG targets 3
different segments - Everyday, Everyday+ and the Sporty segment. According to Steen (2010)
PRG have prioritized the largest and most commercial segments that fit to the grocery channel.
Steen (2010) also mention that the limited space in most of grocery stores in Norway and Sweden
are more challenging for underwear due to the need of more space for sizes, models and styles. In
addition to the running assortment PRG offers seasonal products based on the same models as the
running products. Figure 8 suggests that the assortment strategy of PRG is relatively similar to
the other suppliers in the market, while most of the retailers offer a wider and deeper assortment.

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Figure 8 - Depth and Scope of Ladies Underwear vs major market players in Denmark.
4.4.2.2.2 Mens Underwear
Figure 9 suggests that assortment strategy for men is similar to ladies underwear, but even more
narrow and shallow. According to Steen (2010) PRG operate in the Everyday, Everyday+ and
Sporty segment. In the Everyday+ segment PRG only offer boxers under the brand Pierre Robert.
In addition PRG also offers seasonal products based on the same models as the basic all year
around products. Peterson (2010) suggests that the assortment in the everyday segment is a little
wider due to the demands of the larger stores in Sweden. This suggests that PRG to some extent
customize their assortment in order to fulfill the customer needs. In the sporty segment Pierre
Robert offer one model in several colors. Steen (2010) explains that PRG have put more effort
and focus in developing womans underwear, than in mens underwear, since PRG believes that
the potential is significantly higher within womans underwear. In comparison with major players
in the Danish market, PRG has the most shallow and narrow assortment.
Figure 9 - Depth and Scope of Mens Underwear versus major market players in Denmark.

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4.4.2.3 Tights
PRG operates in the segment Everyday, Everyday+, and in the Warm and Robust segment of
Tights. A majority of the tights are branded La Mote, while the Pierre Robert brand primarily is
used for its thicker seasonal tights. PRGs assortment within tights is relatively similar to HB
Textil, but somewhat wider. As figure 10 shows, the assortment strategy of the suppliers seem to
be quite different than the assortment strategy of the retailers. This suggests that neither PRG, nor
HB Textil are able to offer an assortment that completely fulfill the customer needs.
Figure 10 - Depth and Scope of Ladies Tights vs major market players in Denmark.
4.4.3 Quality of products
It is very difficult to describe the quality in technical terms. It is also difficult to compare these
facts with competitors. To assess the quality of the Pierre Robert brand I have used the results
from the latest group discussions and relevant information from consumer research in Sweden.
According to group discussions in Norway (Ny Insigt, 2010) consumers consider the brand Pierre
Robert as an attractive brand for everyday use. The consumers think that the products fits well,
looks good and have a high quality. The consumers appreciate that Pierre Robert have consistent
models and shape. There is a tendency in the discussions that the young consumers, 20-25 years
old, to a larger extent see Pierre Robert as a fresh and modern brand that presents high quality
compared with consumers 30+. Consumers over thirty perceive the brand as a practical brand
sold in the grocery trade. The target groups in Norway perceive the brand La Mote as a “well
known brand for tights sold in the grocery trade, but old fashioned and boring” (Synnovate,
2008). The brand, which is the leading brand for tights in Norway (Gfk Norge, 2004-2008), has a
long history in Norway and it is perceived as a “safe and predictable” brand.

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The focus groups in Sweden showed that the Pierre Robert brand is not perceived in the same
way as in Norway. They perceive the products, its design and packaging as “attractive” but, when
the sales channel is mentioned they directly assume that the products are of low quality. So in
Sweden the sales channel affects how the brand is perceived in a negative way.
However, according to ScandInfo (2010) the brand is perceived as the second best11 concerning
quality, fit and consistent in shape. It is the opposite when it comes to the brand La Mote which
scores among the lowest on the same parameters; quality, fit and consistent shape12.
4.4.4 Designof products and packaging
According to the design manual of PRG (2009) the design of the La Mote assortment is inspired
by some of the large suppliers and retailers in the market within each category. All the La Mote
products except for tights and knee highs are displayed on a hanger in combination with a
banderole or just a banderole. Tights and knee highs are displayed in cartons. The way of
displaying the assortment is similar to other players in the market.
The product packages are designed in a basic way where the company focuses on clarity, i.e. it
must be easy for the consumer to see the colour, size, quality and model on the package. The
assortment of La Mote is mainly updated twice a year with new colors and patterns. However,
basic tights and knee highs are running products and are seldom updated with seasonal colors or
patterns. The Pierre Robert assortment is mostly packed in a carton package as the more
exclusive brands such as Calvin Klein, Dolce Gabbana and Hugo Boss
www.pierrerobertgroup.com (2010). All the packages are designed so that the consumers are able
to quickly understand the model, color, pattern and size. PRG also uses models on the packages
in order to communicate the correct emotional values. When designing new products within
underwear the company gets its inspiration from Björn Borg, Calvin Klein, Filippa K and Lindex.
When designing new products within tights the inspiration comes from Lindex and Woolford.
Recently the company launched a new sports series, Pierre Robert Sports Collection, where the
company has been inspired by Nike, Ulvang, and the Norwegian designer Kari Traa.
11 Detailed results from the survey are given in appendix 10.
12 Detailed results from the survey are given in appendix 11.

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4.4.5 Price levels
In the total market La Mote is a low price brand, but in the grocery channel, its medium priced in
comparison with private labels and other competitors. The Pierre Robert brand is low to medium
priced brand in the total market, but a premium brand in the grocery trade13.
4.4.6 Sales follow up
PRG offers and apply a full service concept to all its customers, large and small, in Norway and
Sweden. Peterson (2010) suggests that no other supplier offers a service concept to all stores,
irrespective of store size. PRG takes care of ordering, delivery, merchandising (including sales
promotion material), and in the end the company to some extent handle sales of obsolete products
in the customers stores. According to Höienholm (2009) the concept is widely accepted of all the
grocery chains in Norway and partly accepted in Sweden. In Finland the grocery chains neither
allow merchandising, nor visits by sales representatives, in their stores by the suppliers. The sales
force of PRG fully covers each country geographically. The Swedish field sales organization
consists of 6 sales managers and approximately 23 merchandisers. In Norway 3 regional sale
managers, 20 sales managers and 25 FTE’s merchandisers cover the market.
4.4.7 Product profitability
PRG operates within four product groups. Tights are the most profitable segment and contributes
with 37,8% of the gross profit to the company. Socks and Underwear are almost equal, while
garments contributes 3,4% of the total gross profit14. The gross profit margin has been relatively
constant over the years. The gross profit margin of PRG in 2006 was 55,9% and in 2009 54,7%.
According to Hamdahl (2010), the main reasons behind the development is strong focus on price
management, new product lines with higher margins than average products in the portfolio and
focus on strategic sourcing and purchasing. Peterson (2010) argue that it is also a fact that the
customers are willing to pay a higher price for the products in order to apply the service concept
in their stores
13 Survey on price levels are provided in appendix 6-8.
14 Detailed information regarding product profitability provided in appendix 9.

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 PRG operates in 4 different product groups and cover needs of the whole family in the
needs area Everyday, Everyday+, Warm and Robust, and Sporty. By offering all three
product groups, to the whole family, the customers do not need other suppliers to
supplement their assortment. Suppliers such as Triumph, Bjorn Borg and JBS are more
dependent on one major product group for either men or ladies underwear.
 PRG apply a two brand strategy where the brand Pierre Robert is used for products within
Everyday+ and Sporty, while the brand La Mote is applied on products in the Warm and
Robust and Everyday segment. Pierre Robert priced in the medium/high priced, while La
Mote is low/medium priced.
 PRG apply different assortment strategies depending on product group, and each strategy,
is strongly linked to the conditions with limited space in the stores.
 The history of the brands in each country, the level of media investments have shaped
how the brands are perceived in each country. In Sweden the sales channel negatively
affects how the brands are perceived.
 PRG price its products according to consumers’ willingness to pay. When comparing the
prices with other players and similar products in the grocery channel, the price level of
Pierre Robert is high and La Mote medium.
 PRG apply a full service concept to all its customers, large and small, and they are able to
charge higher prices due to the service given. The service concept, when applied on a
national basis, tends to exclude other suppliers since the cost of entry is high. No other
supplier offers a service concept to all stores, irrespective of store size.
 PRG is a profitable company with a gross profit margin of 55%, which is high in
comparison with other market players. PRG have three almost equally strong product
groups in terms of their contribution to the total gross profit in the company.
4.5 Resources
4.5.1 Structures and processes
The management team has established goals and strategies at a general level and for different
organizational units. The periodic plans have been developed and these are followed up, and PRG
have also established a systematic HSE system. According Schea (2009) there is a need of further

33 | P a g e
development of the management system. Early in 2010 PRG started a project where the goal is to
get its management systems certified in accordance with quality and environment, ISO 9001 and
14001, within 12 months.
4.5.2 Company name and brands
In 2008 PRG changed its company name from La Mote AS and Freds La Mote AB to Pierre
Robert Group. According to Schea (2009) the management team thought that the name Pierre
Robert Group was more in line with the goals and strategies of the company group for the
coming years. The challenges of the company since year 2000 had been the recruitment of new
and younger consumers to the category in the grocery trade channel, and to strengthen the market
position in Sweden. According to the Schea (2009) it was a strategically important step for the
company to establish a brand with a Nordic potential in 2005/2006. Pierre Robert has turned out
to be such a brand. Further on Schea has also said the product development in 2006 until today
have been successful in many ways, since the company have managed to increase the share of the
grocery trade of the total market (Gfk Norge, 2004-2008). Pierre Robert has also increased
distribution in Sweden. PRG has continued to work with La Mote as a low to medium priced
brand since it still has many loyal customers primarily in Norway (Synnovate, 2008).
According to (OMD, 2010) each brand has a strong position in Norway, the La Mote brand has a
top of mind awareness of 49% within tights and a helped awareness of 98%, also within tights.
The top of mind awareness of Pierre Robert Lingerie is 13% and the helped awareness is 98%. In
Sweden the helped brand awareness of Pierre Robert is 58%, while the awareness of La Mote is
much lower 33% (ScandInfo, 2010).
4.5.3 Marketing and sales competencies
All the product managers and the marketing managers have a degree in economics from various
universities; this is a prerequisite for an employment at this level within the company. Most of
the people in the marketing organization15 have participated in the internal Orkla Brand Academy
www.orkla.com (2010), and therefore apply the same “language”, models and approach to
marketing related issues. Both Pierre Robert Group and the other sister companies within Orkla
Brands sell and market fast moving consumer goods and the environment enhance and stimulate
deeper learning.
15 Organizational chart is provided in appendix 12 (figure 1).

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According to Höienholm (2009) the sales force is educated mostly through “on the job training”.
The sales force does not have any experience from sales to customers in other channels. The sales
organization at the central level consists of key account managers, all with several years of
experience from marketing and sales, a category management team and customer service16. All
key account managers and the sales director have participated in the Orkla Sales Academy
Röseid (2010). The central organization does not have any experience of working with customers
outside the grocery channel.
4.5.4 Product development competencies
During the latest years innovation has become the company’s key tool for creating growth. To
utilize innovation as a driver of growth PRG and the other companies within Orkla Brands have
some key thoughts and tools that they are committed to.
PRG define innovation as activities that offer the consumer better value, making the consumer
willing to spend more, this increasing the value for the trade and the company. Innovations in
PRG must be based on an understanding of what is driving the consumers’ thoughts and
behaviour – in other words consumer insight. The consumer value can be increased in many
ways, not only through new products. Just as important are activities which improve the offer of
the existing business. On the other hand activities that do not increase consumer value are
considered as maintenance. According to Schea (2009) the success of PRG is dependent on
innovation driving the definition of goals, how the company is organized and how the employees
are trained and evaluated. Innovation is therefore a management responsibility. PRG have
implemented an innovation board which is the main forum for managing the innovation. At the
innovation board meetings the strategies, portfolios and specific projects are reviewed and
resources are allocated. The company apply Coopers’ Stage-Gate process in all its innovation
projects. PRG to some extent interacts with external and internal partners, but do not cooperate
with universities, competitors and other external specialists. To stimulate idea creation internally
the marketing department involves a rather large cross functional group twice a year in order to
brain storm ideas or concepts.
16 Organizational chart is provided in appendix 12 (figure 2-3.

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4.5.5 Productionand sourcing competencies
The company has no production of its own. According to Vestad (2010) the product development
is done in-house in close collaboration with the purchase organization, and its suppliers. The
purchase organization consists of seven purchase managers responsible for whole or part of
product groups. Five of the buyers have previously worked as buyers in the textile industry which
is of great importance to PRG. No other company within the Orkla group work with textiles or
textile related products, this is why it is important for PRG to recruit external expertise.
According to Schea (2009) the company has gone through a major transition when it comes to
buying. Five to six years ago the company mostly relied on its suppliers R&D, today it is PRG
that govern the process, but still in close cooperation. However, according to Vestad (2010) PRG
are still in the early phase when it comes to strategic sourcing. Major activities such as
development of sourcing strategy, identification of new suppliers and total cost analysis need to
be improved.
4.5.6 Management competencies
The top management and employees reporting to the members of the management group have
university degrees within each area of responsibility. They have also gone through either Orkla
Brand Academy or Orkla Sales Academy, specific to their area of responsibility. The group has
also participated in various management programs within Orkla. Most of the employees in senior
positions have a long experience in sales and marketing of fast moving consumer goods in the
grocery trade. All senior employees, management group included, have no experience from the
fashion retail industry.
4.5.7 Financial Strength
Table 2a shows that the EBITA level has improved significantly since 2006. However, due to a
negative change in working capital 2009 in comparison with 200817 the cash flow from
operations declined NOK 29,5 million. Additionally in 2009, due to currency effects, the
company were not able to increase the contribution margin with more than NOK 7,9 million,
while the increase in revenues were NOK 56,6 million. Table 2b shows that the liquidity and
solvency ratios are significant lower than similar suppliers. Also the current ratio is significantly
lower. According to Hamdahl (2010) this is natural since PRG pay dividend to the parent
17 Further information concerning the cash flow is provided in appendix 14.

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company Orkla, and only possess the cash necessary in the business. PRG has a strong owner in
Orkla. According to www.orkla.com (2010) the Orkla Group had a turnover of NOK 56 billion in
2009, and a profit before tax of NOK 1,071 billion.
Table 2a – Key Financials PRG (NOK million) Table 2b – Key Ratios financial strength 2009
 PRG is an organized company where all major processes are documented. PRG plans to
further improve its management system in order to be accredited according to the ISO
9001:2008, and ISO 14001:2004 standard in 2011.
 Each brand, Pierre Robert and La Mote, has a strong position in Norway. The Pierre
Robert brand in Sweden is well known but very low when it comes to top of mind. The
La Mote brand has a weak position in Sweden.
 The level of competence within the marketing and sales organization is high. The
company is specifically skilled within the fast moving consumer goods sector, but they do
not have any experience of working with other channels than the grocery trade.
 Innovation and the process of innovation has become the company’s key tool for creating
growth.
 PRG has no production of its own; instead the products are developed in-house in
collaboration with marketing, the buyers and its suppliers.
 PRG are still in the early phase when it comes to strategic sourcing due to the focus on
sales and marketing.
 The top management and employees reporting to the members of the management group
have all university degrees and various Orkla Academies and management programs
within each area of responsibility.
 Most of the employees in senior positions have a long experience of the fast moving
consumer goods industry, but no experience from the fashion retail industry.

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4.6 ValueChain analysis
4.6.1 Inbound logistics
PRG operates through a Nordic warehousing and distribution system to facilitate effective
inventory management and distribution. To work with this system, PRG has developed a logistic
system and set of procedures that enable quick decision-making and late changes Vestad (2010).
Logistics is an integrated part of the budget cycle and reporting loops, enabling management to
better manage product ordering needs, inventory levels, discounting and distribution issues. The
inbound logistics are based on the following main principles:
Purchasing budget: The expected purchasing volumes are based on budgeted sales volumes and
historical sales volumes. These volumes form the base purchasing volumes for each product. The
purchasers place orders electronically to the suppliers with product specifications for the order.
The ordering system is part of the order, inventory and invoicing system.
Shipping: PRG apply FOB as buying terms to all its suppliers. The inbound logistics is
outsourced to NSV as external partner who follow the goods to the destination, the Nordic
warehouse in Halden, Norway.
Warehousing: The products are delivered in one standard size carton, which is reused when
shipped to its customers. The warehouse is not automated. Unloading, packing, and loading for
outbound goods are handled on manual basis. Retailers as HM, Lindex and Kapp Ahl use fully
automated warehouse systems18. Bjorn Borg has chosen to send finished goods directly from the
suppliers to its distributors in order reduce costs (Bjorn Borg, 2009). According to (Jbs Company
Video, 2009) they operate their warehouse in a semi automated way.
4.6.2 Outbound logistics
According to Peterson (2010) all orders are placed by the sales representatives in their sales
system, or by customer service, and the orders are transferred electronically every day from the
sales system. The same system is used in each country. All sales material is stored in the
warehouse and co-distributed with finished goods. Through the sales system the sales force are
updated on a day-to-day basis on inventory levels. All orders are dispatched on a daily basis.
PRG has outsourced the logistic part to an external partner who handles the transport from the
warehouse to each store in each country. It takes 3-4 days from the day the order is placed to the
18 Source: Observation of the warehouse of Lindex, February 2010.

38 | P a g e
arrival of goods to each store. Custom clearance is handled automatically through a Swedish
partner. The customers in Finland send all order electronically and the goods are distributed via
the external partner of PRG to the central warehouses of each grocery chain in the country. Each
customer in Finland handles the products on its own. PRG continuously controls inventory levels
and updates its expected sales volumes. Based on these reports, and PRG’s targets for inventory
levels and service degrees, the management adjusts purchasing volumes and decides on
corrective actions.
4.6.3 Marketing, Sales and Service
In 2009 PRG invested 7,5% of its revenues in marketing Hamdahl (2010). Both Sweden and
Norway PRG has the highest share of voice in the market regarding underwear (OMD, 2009). In
Norway PRG also have the highest share of voice regarding tights. According to the media plan
of PRG 2010 invests in film, print, boards and online advertising in each country and combines
most of the media activities with in-store promotion material and campaign pricing. In
comparison with other players in the market PRG invests significantly more in media. The sales
organization visits all the customers personally according to customer needs and sales potential.
The sales representatives place shelf orders and sell campaigns for instant delivery. 2-3 days after
arrival of the goods in the stores the products are handled by the merchandisers of PRG according
to the service concept. The service concept is a major cost driver in the company. According to
Hamdahl (2010) the cost of the organization and handling of obsolete products in the stores
amounts to 20% of the company revenue in each country. However, applying the sales concept
on national basis, serving a majority of the grocery chains stores, tend to exclude competitors.
The cost of entry is simply too high. According to Schea (2009) sales and marketing are two
major value drivers for PRG, but also the largest cost drivers.
4.6.4 Supporting functions
IT is outsourced to a separate entity within the Orkla group, Orkla Shared Services. The HR
department operates at business unit level, i.e. shared with other companies within Orkla Brands.
Parts of finance and the handling of salaries, expenses, and other benefits are also handled by a
shared service center within Orkla.

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4.6.5 Value chain conclusion
The company has outsourced several parts of the value chain, and focused on other parts as key
value drivers. Inbound logistics, parts of the outbound logistics, and supporting functions are
outsourced, while marketing, sales and the service concept are value adding key activities
performed by the organization.
4.7 Weaknesses
4.7.1 Management and Organization
The management team all have a background from fast moving consumer goods in Norway and
Sweden. The knowledge of other sales channels, backwards- and forward integration, and export
sales is low. The organization is young, most key personnel within marketing and sales have not
been in the business for more than 1-3 years.
4.7.2 Operations
The product development process in the company is focused towards the existing sales channel,
the grocery trade. The level of distribution in Sweden is a weakness, since the company is not
present with its products in the largest hypermarket chain, and in the discount sector. The Pierre
Robert brand is strong in each country, but closely linked to the sales channel, which may hamper
the possibility to sell the brand in other sales channels. The company applies a service concept
which has been and still is a key driver for success, and customers interested in the service
concept to a large extent only work with one supplier within the category. However, customers
that handle the value chain differently work with several suppliers or just with their own private
labels, causing fewer sales or no sales at all for PRG. The pricing of the products is high,
irrespective of brand, in comparison with similar products sold in the grocery trade channel. The
competition on low priced products has increased, and the pricing policy of the company has
opened up for competition in-store.
4.7.3 Finance
The company is financially strong and the profitability has improved significantly. However, the
strong focus on continuous improvement of profitability is a weakness. It may have a negative
effect on the company’s pricing policy, paying less attention to the competitive situation. It may

40 | P a g e
also affect the future success if the investments in marketing are cut down in order to reach
higher profit levels, from year to year.
4.8 Strengths
4.8.1 Management and Organization
The management and organization are highly skilled when it concerns sales, and marketing of
fast moving consumer goods. As a member of one of the largest company groups in the Nordics,
they have well established personnel policies, selection models, both internal as external training,
and reward systems to all employees.
4.8.2 Operations
The full service concept is a key strength of the company since it enables the company to have a
close relationship with its customers, it offers full control of the assortment in the stores and it
tend to exclude other suppliers from distribution, giving PRG a kind of exclusivity. The
distribution power is a key strength, since it enables the company to apply the service concept on
national basis, excluding other suppliers, because of the cost of entry. It also gives the company
access to more than 6000 selling points, with high consumer flow. The research and development
capability is a key strength which has enabled the company to launch successful innovations and
drive the category growth. Focus on key value drivers as marketing, sales and the service
concept, while outsourcing of other parts of the value chain is strength of the company. The
image of the company is strong in its home countries, and the brand awareness of primarily
Pierre Robert, is also a key strength.
4.8.3 Finance
The profitability level of the company and its owner is strength. Due to the high profitability
level PRG has been able to invest heavily in marketing and build strong market positions. The
owner has high ambitions for PRG and it is the subjective opinion of the writer that the long-term
financial planning is congruent with the firm’s objectives and strategy.

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4.9 Company Analysis Conclusion
 Innovation and the process of innovation has become the company’s key tool for creating
growth.
 The assortment of the company covers the needs of the whole family. By offering all
three product groups, the company avoids competition of other suppliers supplementing
their offer, i.e. the customers do not need several suppliers.
 PRG apply a two brand strategy, with different price levels, aimed at different customer
segments, enabling them to achieve higher margins on the higher priced products.
 PRG price their products according to consumers’ willingness to pay. When comparing
the prices with other players and similar products in the grocery channel, the price level of
Pierre Robert is high and La Mote medium.
 PRG are able to charge a higher price for its products due to the service given.
 PRG apply different assortment strategies depending on product group, and each strategy,
is strongly linked to the conditions with limited space in the grocery stores.
 PRG apply a full service concept to all its customers, and when applied on a national
basis, it tends to exclude other suppliers since the cost of entry is high. The products are
distributed to more than 5500 stores in Sweden and Norway.
 PRG focus on key value drivers as marketing, sales and the service concept, while they
outsource other parts of the value chain.
 PRG has a high profitability level in comparison with other market players.
 The level of competence within focused areas of marketing, sales and the service concept
is high. The company is specifically skilled within the fast moving consumer goods
sector, but they do not have any other experience of working outside the grocery trade.

A market entry strategy for Pierre Robert Group in Denmark

A market entry strategy for Pierre Robert Group in Denmark

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