Strategic Management in Burberry - Essay Example

Strategic Management in Burberry Contents Contents 1 Executive summary 2 Introduction 3 Environmental analysis 3 External environment 3 Market positioning 4 Internal Resources and competence analysis 4 Strategic management 5 SWOT analysis/ (TOWS) 5 Internal analysis 5 Strengths 5 Weaknesses 6 External analysis 6 Opportunities 6 Threats 6 Burberry Strategic analysis 7 PEST analysis 7 Political 7 Economic 7 Social 7 Technological 8 VRIO framework for Burberry 8 Ansoff’s matrix for Burberry Company 9 Market penetration 9 Product development 9 Market development 9 Diversification 10 Recommendations 11 References 11 Appendices A 12 Executive summary The company believes that marketing and management is critical when it comes to organizational success. The Burberry group roles out a vibrant advertisement campaign through editorials, fashion shows and ads. The strategic management team has been targeting both international and local markets through advertisement. The company is focusing on cost effective measures and maintenance of quality. Burberry promotes efficient sourcing of goods and competitive prices. The strategic team of Burberry group has a clear plan for creating brand awareness and sustained brand aura. The apparel company is investing in diversification of product lines. Burberry is using technological innovation to cope with the changing consumer needs. The management personnel are developing software has made it easy to monitor progress and superior designs besides marketing the products. Unlike in the last many decades, it is harder to earn consumer loyalty in the modern times. This means that the company needs to work extra hard to maintain the high standards of the brand. This shall entail changing the products lines and options. This shall make the consumers to feel accommodated. The constant evaluation of the product lines makes the organization to adjust to the evolving needs of the customers. The company needs to expand the product portfolio. This entails removing outdated parts of the product line. Burberry must constantly research on their products in order to update the product lines. Burberry has had a strong brand over the years. This can caused the company to win awards and consumer loyalty. However, the competition from emerging companies and rivals has caused the company to reinvent its marketing and operational strategies. The company is using celebrities, promotions and advisement to appeal to customer besides establishing its brand through durable and competitive products. The company has enormous opportunities through expanding the product lines and targeting all classes in the society in increase its revenues. Introduction Burberry is a globally renowned for influencing the luxury sector. The organization plays a principal role in designing and marketing the market-wear by women and men. The company also specializes on the children wear categories. The company had a robust distribution network that entails diversified retail stores. The company has invested in wholesale and other licensing channels globally. The organization operates it businesses by channels, regions and products. The Burberry group has strong distribution systems in Spain, Asia, Europe and Americas through selective distributive channels. Burberry has licensed third parties for the process of production and distribution of products that carry its trademark. The head-quarter of the company is in London, United Kingdom. The purpose of this essay is to review the strategic management of Burberry group. Environmental analysis The company has been reinventing its strategic plans with a view of remaining relevant and profitable in the global market. The company has been working on brand positioning (Barney & Hesterly 2010). This caused a major increment in revenues from 427 million pounds to 715 million pounds in 2005.the company is extending the products lives in order to match with the modern tastes and meet the consumer needs satisfactorily. The company offers accessible luxury in a move to extend customer base (Colin & Jasbir 2004). This has earned the company a place in the leading global brands in luxury market. The company offers strong alternatives in products categories and price ranges. This has given the company and edge over its competitors (Haig 2011). According to Haig (2011), the company has been able to deal with Gucci, Prada, Cahanel and other major competitors. The organization is estimated to have a capital of over 2.1 billion pounds. External environment The company has been able to rise from recession to make profits of up to 7 percent. The company made sales increase through whole sale by 2 percent and 14 percent through retail. Some of the company’s competitors include Max Mara, Giorgio Armani, Gucci and Todd’s. The organization strategy included expanding the products lines in the recent years. This has helped in the process of improving the brand standing and company growth (Frederic & McBrewster 2010). Organizational strategy is meant to consolidate the position of the company and increase productivity. The company uses popular personalities to market products. The presentation of Emma Watson has raised the position of the brand. This has increased the sales of products like handbags and scarves (Colin & Jasbir 2004). Burberry beat market expectations in the second quarter. The increased revenues are a result of organizational strategy. The company makes durable products. Durability earns the organization consumer loyalty. The management of the company believes in developing good aesthetics, functional products and practical strategies. This captures the tastes of multiple customers at competitive prices. Market positioning The porter’s five forces play a crucial role in determining the market characteristics. The company has continuity products whose products life cycle goes for some years. The trend goods of the company are intended to counter positively to trends. Burberry has a strategic market positioning which tends to target both classic and trendy clients. The organization defines functional luxury as a theme to appeal to customers. Competitors like Polo tend to focus on apparels while Gucci place more emphasis on fashion accessories. Internal Resources and competence analysis The company has high brand equity and a signature check design. The company enjoys a Royal warrant. This means the company can publicly state its supplies the royal family’s products. This happened through Queen Elizabeth II and Prince Charles. The duration of existence has caused the company to be strongly established (Hill & Jones 1998). These accomplishments and recognitions have caused the value to the brand to increase in value. The company has a strong communication campaign. In an increasingly globalised marketplace, companies have to appeal to global markets through social media and the channels available (Charles & Gareth 2012). The company has a strong internet presence. This happens through an interactive website which attracts over 7 million users. The social networking site displaces the products from the company. The name of the site is “the art of trench”. The company invests in developing unique products to appeal to customers. The company is investing in a vibrant information technology team. Strategic management A strong organization must have the capability to develop internal strategies that achieve competitive advantage in the market. The strategies must be sustainable and progressive. Strategic management addresses the competitive organizational environment using an inside out method or approach (Johnson & Whittington 2006). Organizations use the internal environment to influence the external environment. According to Rumelt, market positioning of a company is based on strategy. For Burberry to success, the strategic team needs to focus on a strategy that emphasizes on resources. This may entail building upon the already established brand equity and the status of the luxury brands. The company has a specialized product lines and a history of over 150 years. The company is using fashion shows as both market and sales channels to the organisational products (Moore & Birtwistle 2004). Burberry has heavily invested in innovation and vibrant promotions of its products (Barney & Hesterly 2010). Extending the signature check design to other product lines would increase the productivity of the company. SWOT analysis/ (TOWS) Internal analysis Strengths Successful companies benefit from a strong and proven management and strategy team. The company has had a consistent and progressive top management for over a century. The management affects each and every department of the organization. The management has established interdependence among departments. The strategic management of any organization invests in licensing growth. This leads to delivery of a high and incremental return of capital. The company employs competencies that are relevant to the organizational growth (Tungate 2012). This has given the company an edge over her competitors in the market. Reputation is one of the easy ways of connecting with clients. The company has a strong reputation of heritage goods or products. Modern fashion companies must use a flexible product sourcing techniques. This has led to increased revenues for the company. The flexibility has caused the company to adjust in times of economic turbulence. The company has a low transactional exchange exposure. Weaknesses The company has a weak vertical integration mechanism. This has caused a reduction in the capture of margin and value in the process of manufacturing. There is an increased fashion risk especially through apparel segment. This segment accounts for most of the company’s profits. The company has had a slow growth in the Japanese market. External analysis Opportunities The company has been widening the wholesale distribution. The company has the potential to put in place an enhanced and wide retain network. This would result in increased revenues and tremendous growth especially in new markets. The company has the opportunity to extend the apparel offering (Charles & Gareth 2012). The company can increase its profit margins through investing in advanced accessories in Japan and Spain. The company has an enormous potential in expanding to new markets. This can lead to increased distribution in the international market. Threats The company has a tendency to over rely on third parties in Japan. The company has vulnerable to counterfeiting. This has a profound effect in the profits made. This is can have an extremely negative effect on in markets that lack strong anti-counterfeit laws. The company suffers from conflict of interest between the external shareholders and GUS. The company appears to have a mono-brand. This makes the company to be exposed to increased fashion risk with regard to its trademark and brand. At the same time, the company’s control over wholesale accounts and licenses is a potential threat. Check appendix A, Table 1-swot table Burberry Strategic analysis The company is said to hold the fourth position in the market with a 5.2 percent. In the BCG matrix, the company falls under the category of underdogs just like the other major companies. This is because the market lacks a real leaders and the major brands fall under underdog’s category (Moore & Birtwistle 2004). The company has been increasing its market share under the leadership of Rose Bravo. The company is keen on improving the product lines and broadening the product portfolio. The changes in the fashion world have caused the company to rethink its strategic analysis and initiatives. PEST analysis Political The influence of china and India is expected to be felt in the apparel global market. Chinese and Indians are expected to take up to 50 percent of the global market in the coming years (Frederic & McBrewster 2010). This is expected to impact the production of Burberry goods. The world trade organization is expected to remove a maximum percentage that can be produced or manufactured by a country. This is expected to alter the world systems of manufacturing apparel. Economic Luxury apparel markets in the world have continued to have an edge over the traditional apparel market. Burberry is known to have heavy investment in the luxury market (Johnson & Whittington 2006). This has translated into high profit margins and growth on a sustained scale. The luxury market is said to have relatively low market cost and long term demands. This makes it less vulnerable to recession. Social For a company like Burberry to succeed, customers must have a strong sense of attachment with its products. The customers must have a strong sense of importance and pride to these products. Fashion companies use renowned personalities to indicate the quality of its products. In developing economies, organizations should be able to appeal to the upper class and lower class at the same time. Successful fashion companies offer durable products which are attractive to all social classes. The company has a strong innovative and research team. The company researches on the consumer need in order to meet consumer needs in a sustainable way. Competitive companies offer new qualities and changing designs on a regular basis. As a result, the company is able to command prices which only few competitors can afford. Technological Technology is changing fast in the apparel industry. This has caused Burberry to invest in software programs that positively influence the product pattern design and batch processing (Johnson & Whittington 2006). The new technology enables companies to move from design to retail with extreme efficiency. The new software programs are effective in comparing prices across many countries according to factories (Hill & Jones 1998). The industry must capitalize of the ongoing technological innovations. The company acknowledges the role of technology in appealing to the global market. The company has invested in a competent technology department that develops or sources for cutting edge software technologies to steer the company to unassailable heights in the global market (Frederic & McBrewster 2010). VRIO framework for Burberry (Value, Rarity, imitability and organization) Looking in to the company’s value chain, the company is making intentional steps at every level of product development to produce the most excellent product. The company has placed more value on the product stages that increase quality and the cost decreases (Charles & Gareth 2012). Burberry has used processes value to promote unique product lines and remain competitive. The rarity of the Burberry product lines in the strength of the brand that has been built for over 150 years. The company has trendy brands and trademark checked product that improves the rarity value of the company (Frederic & McBrewster 2010). Burberry has identified immutability as a threat. As the company increases the product lines, measures to counter immitabilty and counterfeiting are being considered. This includes using the legal mechanisms and patent laws. Burberry has a high level of organization. This has caused the company to have an excellent management model over the years. The company invests in profitable competencies and creating functional structures at the level of management and organization. Burberry invests in products that are valuable, rare and costly to imitate. Ansoff’s matrix for Burberry Company Market penetration Market penetration occurs in the cases where company penetrates a market with products. The strategy commences with the satisfying the existing clients in the organization (Frederic & McBrewster 2010). The strategy helps Burberry to increase sales without having to necessarily drift the product-market strategy. Burberry has been improving the quality of its products and attracting non-users in order to penetrate new markets. It is cost effective to retain customers than to attract new customers. At the same time, Burberry has embarked on a campaign to encourage the existing customers to use more products from the company. Product development Burberry is considering introducing new products into the same market. This shall help the company to counter the competitive entry (Hill & Jones 1998). Burberry has maintained its reputation through product innovation and the use of technology while executing strategies. Targeting new geographical areas helps in enticing new customers. The organizations have been aggressive in protecting its market share and gains. Market development Burberry is using the strategy to expand the consumer base. This entails spreading the existing products to the potential consumers through aggressive campaigns. The strategic team is targeting new international markets (Hill & Jones 1998). This demands the company to use cross-cultural techniques and acquisition techniques in order to effectively attract and connect with newly acquired markets (Frederic & McBrewster 2010). Besides targeting new geographical areas, the company is keen on introducing new uses for the company products. Low market share means that competitors have an upper hand. At the same time the shareholders end up being dissatisfied with the performance. Diversification Organizational strategic management must been able to diversify its current products. The fashion company has gained market share steadily over the years. Most organizations use backward, horizontal and forward integration in the diversification strategy. This strategy has enabled the Burberry Company to grow faster than competitor companies (Hill & Jones 1998). The strategic team is keen to conduct research before venturing into the new markets. This has helped the company in minimizing the risks of diversification. Organizations need to consider the changing consumer tastes and the strength of new market entrants in the process of diversification (Frederic & McBrewster 2010). Burberry has not been using the most efficient marketing mix in some markets. Research shows that the new entrants have a change given that the market lacks an outright dominant player. The strategic choices for competitive organizations indicate that the suitability aspect of strong market presence. The company has many opportunities to exploit. These include new markets and new products. The strategic choices are likely to consolidate the organization’s position as one of the leading brand. The biggest threat is resistance to change in a technologically driven market. Competitive companies enjoy good acceptability from stakeholders because of a strong reputation. The recommendations arising from both SWOT and ansoff matrix indicates that fashion companies have to change to increase revenues. The strategic choices for Burberry are feasible and practicle. Burberry has resources necessary to execute the strategies to dominate the markets and retain the existing customer base. Recommendations The company needs to develop a responsive product line. This entails developing trends that attract the young generation or audience. The company needs to consider the multiplicity of the nature of the targeted audience. The company has both the young and the old clients. It is recommended that the company develops a less-expensive line of production for the youths. This can end up saturating the brand among all the target groups. Burberry needs to have real strategies on how to sustain the loyal customers. The quest to win new markets often causes the loyal customers to be forgotten. As a long-term strategy, the company can consider ridding some of the product lines their licenses. This can cause introduction of new stores. The increase in the Burberry customer base demands that the company increases the number of stores. This shall make the products affordable and accessible. Burberry group needs to establish a strong presence in new market. The strategic team can consider acquisitions in untapped markets and conduction through research to deliver new products in new markets. The company can collaborate with the information technology giants to develop mobile device applications. This can allow that company to have a strong relationship with clients across the world. As a management strategy, Burberry needs to reduce bureaucracy and promote participatory leadership which is inspirational to employees. The company needs a strong reward management strategy. References Barney, J. B., & Hesterly, W. S. 2010. VRIO Framework. In Strategic Management and Competitive Advantage. 1st ed. Pearson. Charles W. L, W. H., & Gareth , R. J. 2012. Strategic Management Theory: An Integrated Approach, 10th ed. Cengage Learning. Colin , G., & Jasbir , K. 2004. Fashion and Textiles: An Overview. 1st ed. Berg. Frederic , P. M., & McBrewster , J. 2010. Burberry. 1st ed. VDM Publishing. Haig, M. 2011. Brand Success: How the World's Top 100 Brands Thrive and Survive, 2nd ed. Kogan Page Publishers. Hill, C. L., & Jones, G. R.1998. Strategic Management Theory: An Integrated Approach 4th ed. Houghton Mifflin. Johnson , G., & Whittington, R. 2006. The Environment”, Exploring Corporate Strategy 7th ed. Prentice Hall. Moore, C., & Birtwistle, G. 2004. Creating an international luxury fashion brand. International Journal of Retail & Distribution Management, 32,8, 412-422. Tungate, M. 2012. Fashion Brands: Branding Style from Armani to Zara, 3rd ed. Kogan Page Publishers. Appendices A Table 1-a table of the SWOT analysis Strengths Image Quality Brand equity Design Promotions advertising Weaknesses Lack of identity Too many licenses Distribution channels Opportunities Growth of the economy Extension of apparel offering Increased distribution especially in Japan Further development of accessories Threats Many competitors Imitations Reliance of third parties Mono-band and trademark checks leading to increased fashion risk Read More