Russell Corporation’s SWOTs and Competitive Advantages

Russell Corporation is a leading manufacturer of sportswear, including sweatshirts, sweatpants, and t-shirts, featuring brands such as JERZEES, American Athletic, Cross Creek, Russell Athletic, Spalding, and Brooks Sports (athletic shoes). Perhaps you own some of their products. Based in Atlanta, Russell’s annual sales are about $2 billion. Its main competitors include Adidas, Nike, and Benetton. Founded in 1902, Russell runs every step of its value chain: from weaving raw yarn into fabric, to dyeing, cutting and sewing, to selling garments through retailers. Russell sells through specialty shops and mass merchandisers (like Wal-Mart) in about 100 countries. The United States is the world’s biggest apparel market. Unlike Nike and Adidas, Russell does not enjoy much brand loyalty. Many customers shop for athletic apparel on price, seeking the lowest-cost offerings. In 2006, Russell was acquired by a subsidiary of Berkshire Hathaway, which was founded by Warren Buffett.

Russell makes most of its apparel cost-effectively in Central America, a large and growing trade region. Russell is investing heavily in new manufacturing technologies and a better-educated labor force in its factories there. The trend toward hemispheric free trade, an extension of the NAFTA accord, is gradually opening new markets throughout Latin America, which is home to some 500 million people.

In recent years, competitors in China have dramatically increased apparel exports to the United States, to the detriment of U.S. producers. For example, where Alabama was once the world center of sock manufacturing, the sock capital recently shifted to Datang, China. Alabama sock workers receive an average of $10 an hour, compared to 70 cents an hour in Datang. To protect its home-grown apparel industry, the U.S. government imposed some trade barriers against Chinese imports. But the U.S. is under pressure from the World Trade Organization to eliminate these barriers.

Russell manufactures much of its garments in Honduras, a poor Central American country with 7 million people, most of whom are not educated past the 8th grade. The Honduras currency, the lempira, has been weakening against the U.S. dollar over time. The Honduran government has used incentives to create a large cluster of apparel firms. In addition to low-cost labor, Honduras offers a generous tax incentives to foreign manufacturers. Honduras is home to Puerto Cortes, Central America’s biggest Port, which is only 22 hours from Miami by container ship. However, Honduras’ legal system is weak and corruption is a problem.

In light of the above, what are Russell Corporation’s strengths, weaknesses, opportunities, and threats? In addition to listing the obvious ones above, try to think in terms of some less obvious ones or others not indicated above. What can Russell do to establish or renew competitive advantages for itself? What can Russell do to counter the weaknesses it faces internally, and the threats it faces externally? If you were the CEO of Russell, what marketing goals and objectives would you establish for the firm?