The Business and Competitive Enviroment of Burberry - Case Study Example

Burberry is a British fashion clothing brand started by Thomas Burberry in 1856. It was to his credit that he started the business when he was only 21 years old. The brand was initially started as a producer of sportswear for the women of Basingstoke, England. However, Thomas Burberry being an intelligent entrepreneur soon realized the potential of the brand that he was trying to develop and moved towards outdoor attires. The brand has lately introduced a wide range of fragrances in their inventory. In 1995, the group's stake was purchased by General Universal stores. However, in 2005, General Universal Stores divested their stake in 2005. The current CEO of the group is Angela Ahredts, who replaced Rose Marie Bravo. (Burberry Official Website, 2010) From its inception, the brand has experienced massive growth and now owns thousand of outlets and franchises throughout England. The company specializes in menwear, womenwear, childrenwear and non-apparel garments. Out of these, the largest share of its revenue comes from womenwear. Burberry is also a household name in the international market. This feat was achieved with the recent trend of globalization and this is where the company pays most attention. The company has no distinctive mission statement. However, reading on from their annual reports it can be seen that the company wants to maximize its revenues in order to increase the business profitability. This is what the entire team and the management of Burberry plc works for and for many years now. In order to achieve their mission of maximizing revenue the company is trying to streamline their operations by moving towards focused collection. Although, this is a generic term but it implies that the company is moving toward more balanced collection in terms of design, style and quality. The company is doing this through constant innovation strategies. They have increased the frequency of new designs coming to retail outlets. The brand also aims to achieve its objective by increasing productivity, streamlining store operations, by adopting a policy of quick expansion and by making use of the latest technology to make their operations more and more efficient. (Burberry Annual Reports of 2008, 2009) From our discussion about Burberry plc Group, we can see that it has been doing brilliantly since its inception. However, in the recent years, the firm is facing some challenges in the form of recession and fierce competition in the industry due to entry of a lot of new firm in this market to cater the needs of the consumer. In the next part of this report, we are going to look at some of the strategies that Burberry has adopted to counter these challenges. Burberry has been greatly affected by the ongoing recessionary phase in which we find global economy in. Economic recession has affected Burberry indirectly in an adverse way. As a result of economic recession, people's purchasing power has been deteriorating and now they have to think twice when buying a luxury item like Burberry. As a result of this, Burberry's profits are fast falling and irked the top management of the company for sometimes now. One example of how Burberry is been affected by continuing recession can be seen in the Burberry Group's income statement for the year which shows a profit of 99.8m as compared to 170.9m that were earned a year before. This was decline of approximately 41%. This shows how badly the firm is affected by the current recessionary wave that the world is experiencing. Another thing that worries Burberry's management is the structure of supply-chain of the company. The company finds that in few of the firm's product categories, it relies on small number of supplier. As a result, these suppliers command more authority over Burberry and this over reliance on few suppliers can cause a lot of trouble to Burberry. However, the only way the situation can be improved is by restructuring the supply-chain management of the company, which the company is trying to undertake with some success. Similarly, most of the firm's business is being carried out in Japan. Its fragrance licensees are also located in Japan. The firm is in a condition of "all eggs in one basket" and fear s "weathers the storm". As a result of this the firm is increasing concerned and wants to diversify its activities to other parts of the world also. This is a seemingly difficult task, given the global financial crises and other troubles that the firm faces on political, economic and social frontiers. (Economist, 2009) Similarly, the market in which the firm operates in has become more competitive and there is now more fierce competition than ever before. These conditions of intensive competition coupled with global economic environment and dependence on few suppliers have clearly worsened the conditions. The need to supply goods at the right place, at right time and at right pricing has certainly become difficult for Burberry, if not impossible. How do you tackle a situation like this The answer to this is simple. Burberry is tackling the situation by giving more importance to its Public Relations activities. In the year 2009, Burberry was able to accomplish the following feats: Reduced Carbon Dioxide (Co2) emissions by 13 percent from the company's head office building. Burberry Management conducted 487 visits to the factories under Burberry plc group in order to curb any activity that was increasing the cost or against the interest of the company or its consumers. This activity increased the goodwill of the company. Launched the Burberry Foundation. Burberry plc group has also initiated an intern programme. The purpose of this program was to give young scholars a chance to learn about the corporate world. In an attempt to move toward the environmental friendly operations, the firm has reduced the air travel by 17%. This again was a great move towards the goodwill building activities of the company. The company was so determined to increase public relations activities; the company even moved their headquarters to Houseferry. This was done to reduce environmental footprints and to build goodwill for the company. It was also one of the founding members of Luxury Brand Sustainability Groups. Another activity to counter the adverse external factors, the company has given great importance to operational excellence strategy. This was done to make sure that the operations of the companies are efficient. (Wall Street Journal, 2009) The company has framed a code of ethical standard. This has been done to ensure healthy Business Partnerships from all stakeholders that are affected by the operations of Burberry. They focus on shared values and individual values in order to make sure that the company is not neglecting the feeling of any of its stakeholder. Environmental excellence is also one part of Operation excellence strategy that the firm is pursuing. The focus here is to reduce waste, Co2 (Carbon Dioxide) emissions and maximize the firm's control over its environment related issues. Excellence in people management is another part of the firm's policy. It involves retaining and attracting the best employees for a job. There are a lot strategies that the firm has implemented in the system to pursue this objective. The basic focus of the operational excellence strategy is to provide the best quality products and services to consumers. In order to do so, the firm has established a Quality Control Department which examines the products at regular intervals to make sure that they are free from any defects and that they maintain a required standard of quality and craftsmanship. The firm is also aware of its role as a member of the society. In the recent years, Burberry managers have decided that it's time to payback the society. The firm has been actively involved in activities which are beneficial for the society. Burberry Foundation is one example of the firm's contribution to the societal contributions. These strategies of operational excellence have clearly given the firm a distinctive position in the fashion market. (Burberry Annual Report of 2008, 2009) Another interesting fact about the check-and-balance, that Burberry implements is that Michael Mahony, The Senior Vice-President of the Burberry Group, and General Counsel are accountable for corporate responsibility issues. This committee reports to Group Risk Committee of Burberry Group. There are three meeting held everywhere in which a team of nine members is chosen to keep a check on Burberry's supply chain, environmental issues and operational excellence. In the end, we can safely conclude that Burberry was one company which started from a dream. A company initiated by a young entrepreneur, who was only twenty one years old at that time. However, it was not long that Burberry grew and now it holds a distinctive position in the fashion market. The company, as of now is a multi-million dollar company, facing intense competition from other firms and fighting recession. As we have seen in the earlier part of the report, that Burberry has adopted and it has been partly successful. Some of the techniques are so good that many other companies are also adopting them and learning from Burberry's implementation of these techniques. (Daft, 1994) References: Richard L. Daft. (1994). Management. The Dryden Publishing Burberry Group Limited (2008). Annual Report of 2008. Retrieved: 5 January 2010 Phillip Kotler and Gary Armstrong (2008). Principles of Marketing. Prentice Hall Economist. (2009). the Online Magazine. 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