Abercrombie and Fitch - Case Study Example

Abercrombie & Fitch Table of Contents Table of Contents 2 Introduction 3 Identification and description of environmental threats 3 Identification and description of Opportunities 4 Identification and description of Strengths 5 Identification and description of Weaknesses 5 Use of strengths to deflect threats 6 Using of strengths to take advantage of opportunities 6 Conclusion 6 References 7 Introduction The famous American retailer, Abercrombie and Fitch was founded in 1892 by David T. Abercrombie. In 1900 Ezra Fitch joined the company as partner. It is a specialty retailer dealing with upscale casual apparels that include casual sportswear, fleece, graphic t-shirts, jeans, sweaters, shorts etc (Plunkett, 2008). The company’s uses its own retail outlets as well as its websites to sell its products. There are five different brands under the company. These are Abercrombie and Fitch, Hollister and RUEHL, Abercrombie kids and Gilly Hicks: Sydney brands. Presently the company is operating in US, UK and Canada. Till January 31, 2009 there were thousand and onetwentyfive A&F stores operating in the above mentioned three countries (Abercrombie & Fitch, n.d.). Almost eighty thousand one hundred people are employed in the company. This paper embraces, not only the major external threats but also the opportunities that the company is likely to face. Furthermore the internal strengths and weaknesses of the company are also indentified and described in this paper. Finally there is an in-depth analysis depicting the various ways the company can capitalize on its strengths in order to reduce the threats by making maximum use of its opportunities. Identification and description of environmental threats Threats are often considered as one of the major external environmental factors that badly affects the performance of an organization. Any organization with the intention to stay ahead in the competition in the long run should definitely try to indentify and analyze its possible upcoming threats so that it can take necessary preventive measures. Threats that a pose a major challenge to A&F are forgery of goods, economic meltdown and increasing rental rates in America. Counterfeiting of goods is a major threat not only to Abercrombie and Fitch but also to the entire apparel industry. Counterfeiters are found to be making cheap products and selling them using the name of Abercrombie and Fitch. This has been a major setback for the company over the years as its brand name has been badly affected because of it. Global economic slowdown had it impact on Abercrombie and Fitch as well. The slowdown which started in the midst of 2008 has reduced the purchasing power of the common people in all the developed and developing countries in the world. Developed countries are the ones to be most affected by this meltdown which in turn has hindered the sales of the company because A&F operates in three most developed countries in the world i.e. US, UK and Canada. Increasing rental rates in America is a cause of serious concern for the company. Higher rates are preventing the company from opening any new store as this would increase the total cost of operation which is not desirable in the present economic condition. Identification and description of Opportunities Major opportunities that should be considered by the company include-expansion in new markets, increasing sales through websites and developing new concepts (Gnedash, Petrushin, Hanson, n.d.). Currently A&F’s stores are located only in three countries (US, UK and Canada). As a result the company has the opportunity to capture the markets of other developed and developing economies in Europe and Asia. Increasing online sales is another major avenue that the company can explore to boost up their sales. With the number of internet users increasing continuously, the company can enhance its sale by making itself accessible to a varied range of customers on the net. The major advantage of online sales is that people can purchase any A&F product from anywhere in the world. A&F can also amplify its sales by developing new concepts. Presently the company deals only with casual apparels, an entry into the formal product lines will increase the sales by pulling customers from that segment. Identification and description of Strengths Strong brand portfolio, huge experience and sound financial performance are some of the major strengths that have made Abercrombie and Fitch a name to recon in the world of apparels. There are four strong brands (Abercrombie and Fitch, Hollister and RUEHL, Abercrombie kids and Gilly Hicks: Sydney) under the mother brand Abercrombie and Fitch. Abercrombie and Fitch is itself an established brand in the casual apparel industry. The company has been operating for almost a century; as a result it has gathered a huge industry experience which constitutes as one of its major strength. It requires a consistent and resilient performance to remain financially strong in the industry for so long and A&F has been found to be able to do so. Identification and description of Weaknesses Abercrombie and Fitch’s major weakness is its limited geographic reach. The company operates in only three major countries which include US, UK and Canada; as a result the customer base of the company is not that vast. Its major competitors like Gap operate in 19 countries around the world. Hence to ensure that it doesn’t lag behind in the competition, A&F has to make its presence felt in the international markets well. Another major weakness of the company is its low inventory turnover ratio which means the company has not been able to clear its stock quickly and properly. Use of strengths to deflect threats Abercrombie and Fitch can use its strengths to minimize its threats. The threat of economic recession can be best dealt with its huge industry experience. A&F is a century old organization having a vast experience in American casual apparel industry. The company is likely to have enough knowledge about its competitors, customers, suppliers and the economic condition of the regions where it has been operating. So the company is at the best position to deal with the critical economic conditions like recession when overall demand of goods and services has decreased. Moreover its strong financial condition would help the company to overcome the sudden fall in revenue. Using of strengths to take advantage of opportunities Abercrombie and Fitch with its established brand image can take advantage of untapped market of developed and developing countries that are located in Europe and Asia. People are already purchasing A&F products online from various parts in the world. As a result they are very much aware of the brand A&F but since there is no store, the volume of sales is low. A&F is a well known brand of casual apparel, but it has hardly any presence in the formal wear category. So with its strong brand image it can easily enter the formal wear market and establish a strong presence there. Conclusion Abercrombie and Fitch is a renowned organization in America and UK. Like any other company it also has its share of external threats, opportunities, internal strengths and weaknesses. However the threats can be minimized and opportunities capitalized with the proper execution of strengths that the century old organization has. References Abercrombie & Fitch, No Date, Abercrombie and Fitch Investors, Retrieved February 2, 2010 from http://www.abercrombie.com/anf/lifestyles/html/investorrelations.html Gnedash, O. Petrushin, A. Hanson, B. No Date, Abercrombie & Fitch Co. Company analysis, retrieved February 2, 2010 from http://www2.dsu.nodak.edu/users/rbutz/E-Commerce/PowerPoint/S08/Brent_ANF.ppt. Plunkett, J. W. 2008, Plunketts Apparel & Textiles Industry Almanac 2008: Apparel & Textiles ..., Plunkett Research, Ltd Read More