Demonstration of the understanding of the concepts of trade-offs and market

forces in the retail business.

2120671 Prachi P Jain

Micro Economics (BBA133)

Prof. Middi Appalaraju

BACHELOR OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

Bengaluru, India

2021

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Table of content

Sl. No. Topic  Page No

1  Abstract  3

2  Concept of trade off and opportunity cost 3

3  5
Van Heusen

4  Peter England  7

5  9
Conclusion

6  References 9

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Abstract

The economy has been drastically affected by the COVID 19 pandemic and a lot of retail
companies in India faced many tradeoffs and were able to cope up with the dynamic market
forces to survive in the long run and carry on its business using strategies and making decisions
wisely. The two companies I have chosen for demonstrating my understanding of tradeoffs and
opportunity costs are Van Heusen and Peter England, the top leading fashion brands in India.

Concept of trade off and opportunity cost

What is tradeoff?

Trade off basically means the experiencing a choice between two alternative decisions, which in
the Layman’s terms would be a compromise to choose one for another. The theories of
economics define tradeoffs as a situation in a company where making a choice means losing
something. It is like a compromise. It is the understanding of how we allocate scarce resources
and negotiate opportunity costs.

What is Opportunity cost?

Opportunity cost means the loss of the next best alternative by choosing one among the many
alternatives available. In business, when a decision is made of choosing an alternative,
opportunity cost is defined as the value of the next best alternative, which is given up, after what
is chosen.

For example, an employee takes a day off at work to go to a concert, he/she gains the opportunity
of having fun and listening to their favourite band/artist. By doing so, they lose the salary of that
day as the cost for that opportunity.

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What is the importance of tradeoffs and opportunity cost?

Tradeoffs and opportunity cost play a very important role in the economic world. According to
the concepts of economic theories, tradeoffs create opportunity cost, wherein the alternative
which is not chosen when a tradeoff is made, is the opportunity cost. The concept of these
theories helps a manufacturer to determine whether they have to produce a particular good or
not. He can assess the economic benefit of going for a production activity by comparing it with
the option of not producing at all. He may invest the same amount of money, time, and resources
in another business or “opportunity”.

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Van Heusen

Founded in the year 1881, by John Manning Van Heusen, Phillips-Van Heusen is one of the top
leading fashion brands in the world. Aditya Birla Fashion and Retail Limited (ABFRL) is the
owner of the Indian Section of this brand. The products of Van Heusen India are made in India.
ABFRL is India’s first billion-dollar fashion powerhouse. This luxurious company has spread its
branches across 31,000+ multi brand outlets and 6,800+ point of sales in departmental stores
across India. It has a repertoire of other noteworthy, outstanding brands like Louis Philippe,
Peter England, Allen Solly etc.

Van Heusen deals in all kinds of clothing for men and women from formal wear, western wear,
lounge and athleisure, accessories, innerwear and lingerie wear. Lately, they started
manufacturing masks and athleisure wear, tying partnership with the government body, to fight
the covid pandemic and to boost their sales in the global fashion market. Keeping up with the
fashion social status, Van Heusen helps one showcase their personal flair by wearing their
branded stylish masks.

There are various trade-offs that Van Heusen faces on a daily basis. Some of them are –

1. Expanding into Casual Fits vs Advertising Formal Wear

To cope up with the challenges and hindrances the Covid 19 had thrown upon, Van Heusen
expanded their offerings in casual fits as Work from Home gained steam during lockdown. Due
to the dip in the sales of formal wear like blazers, shirts etc. in both the sections of men and
women, this leading fashion brand launched its sub brand for expanding their sales in the

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casualwear market since the pandemic had driven the demand for Work from Home. This was
the tradeoff faced by the company and the opportunity cost they had to pay in order to survive in
the market.

Van Heusen recently signed with Jacqueline Fernandez as their brand ambassador for its sub-
brand-new denim edition. The Chief Operating Officer, Abhay Bhugune, gave out the
announcement saying it was the best opportunity for them to sign in with the well-known
Bollywood glamorous actress for it would make the young crowd comfortable with hopping onto
the trend. This was their strategy to cope up with the dynamic fashion market forces.

2. Elegance vs Abundance

Van Heusen considers its customers, style and elegance, not just as fads, but a philosophy. Van
Heusen believes in manufacturing the most elegant fits for the young professionals to create their
highest impact, and style their way through anything. However, the sub brand of Van Heusen, V
Dot, painted a bold sophistication on the brand’s philosophy of style and elegance by pointing
out the needs of basic, non-juvenile, unlively and edgy production for a younger crowd which
initiated a change in their lifestyle. They faced this trade off very smartly by balancing both the
situations and taking advantage of the second-best alternative.

This increased their sales for even women primped and groomed themselves in their “daily-chic”
and impeccable sports collection. That fashion line included soft linen and easily washable jeans
etc. which made their sales grow in abundance. Like this, they reached out to their target
audience and Van Heusen became everyone’s favourite- from attending formal parties in royally
stylish attire, to brunching on a Sunday in casual fits.

3. Quality Customization vs Low-Cost Production

Van Heusen faced this trade off back when the dynamic fashion market was unpredictable (like
it always is). On one hand, with the release of its sub brand, V Dot, the exclusive fits would be
disorderly tailored yet, competed with the readymade market apparel because of its cheap cost,

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Van Heusen also offered customization of shirts and pants in its move, MY FIT where in it
would serve its customers just right with the choice of personal customization.

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Peter England

Founded in 1889, to provide khaki trousers to the British soldiers during Boer War, Peter
England is now India’s leading menswear brand. Acquired by Aditya Birla Group, this dynamic
brand has expanded its branches across 150 towns and cities, with 700+ outlets and more than
3000 multi-brand outlets, with a huge customer base of 4 million. With a staunch belief in
authenticity, Peter England has become one of the most trusted and responsible international
brands, providing unmatched value to young Indian men.

Peter England deals in a very wide variety of clothing for men from casual t-shirts and trousers,
to formal shirts and blazers, to traditional kurtas and Indie wear. To fix the closet of men
flawlessly, they do not step back from manufacturing top class accessories and footwear, and
protective gears too, like masks and face shields to deal with this Covid 19 pandemic which has
also helped them to boost their sales to survive in the dynamic market with constantly changing
conditions.

A few trade offs faced by Peter England are as follows:

1. Production of Quality Specific Masks vs Increased production of existing products

Facing trade off by Peter England was, in one way, done by manufacturing high quality masks
with anti-germinal solutions to fight the pandemic and finding its opportunity cost by saving the
production cost of manufacturing their actual goods but making masks which was the biggest
need, and in the highest demand during lockdown. Secondly, Aditya Birla Fashion and Retail
Limited (ABFRL) gave a big announcement which stated the new partnership of Peter England
with Khadi and Village Industries Commission (KVIC) to develop an exclusive product line
branded as ‘Khadi by Peter England’ and strengthen their popularity in the Indian demography.
This was their smart strategy to increase their production amid the market dynamics which
challenged them to face the situation.

2. Increased Variety For Men vs Entering Women Fashion

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Peter England had started off with clothing production in male section only, providing all lines of
fashion from formals, to denims and even kurtas. The prime reason for its success is the quality
this brand provides along with the wide range of variety. Peter England has won awards for
being the ‘Best Brand In Men’ etc. Whilst they always stayed updated with the fashion market
dynamics, they could spread their branches in entering women's fashion to uplift their standard
and broaden their reach. Instead, they chose to keep men’s fashion their opportunity cost whilst
making a trade off between men and women fashion.

3. Wedding Season Sales Boost vs Survival Struggle Amid Pandemic

Fueled by weddings and renewed consumer optimism, the business grew strongly between
January and February 2021, as against the same period in FY20 when Covid initially crashed the
economy drastically and selling goods was a real task because people had nowhere to go. This
report states the tradeoff faced by the company in the wedding season, taking the opportunity and
spending its cost to opt for this alternative smartly. This decision facilitated their sales and they
successfully coped up with the market forces amid the second wave of pandemic.

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Conclusion

Van Heusen and Peter England are just two examples used here. A lot of other companies use
these popular economic theories of tradeoffs and opportunity cost in their day-to-day activities. It
is something that is gaining a lot of importance lately especially because of the pandemic
situation. If this concept is known by all, then our economy would rise tremendously and
compete with the other top economic countries in the world.

References

Trade-offs and opportunity cost (29th August, 2021) https://www.google.com/search?

q=trade+offs+and+opportunity+cost&oq=trade+offs+and+opportunity+cost&aqs=chrome..69i57
j0i512j0i22i30l8.6196j1j7&sourceid=chrome&ie=UTF-8

Van Heusen (29th August,2021) Van Heusen New Collections for Men and Women |
Vanheusenindia.com<br>

Economic Times (29th August, 2021) https://economictimes.indiatimes.com/industry/cons-

products/fashion-/-cosmetics-/-jewellery/pandemic-impacted-footfall-economic-activity-may-
pick-up-after-q1-aditya-birla-fashion/articleshow/83064475.cms

Economic Times (29th August, 2021) https://economictimes.indiatimes.com/topic/Peter-England-

Fashion/news

Peter England (29th August, 2021) https://www.google.com/search?

q=peter+england&oq=peter+england&aqs=chrome..69i57j0i457i512j0i402l2j0i131i433i512j0i5
12l3j0i433i512l2.2764j0j15&sourceid=chrome&ie=UTF-8

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