The Creation of a Burberry Fashion Clothing Brand - Case Study Example

1. Introduction Burberry is a British fashion clothing brand which had started initially with outerwear garments for the sportsmen of Basingstoke butis today a leading luxury brand with global business. It is defined by its authentic British heritage and enjoys unique positioning within the luxury arena. It is based on the principles of quality and function and has globally recognized portfolios. The company strategy is to enhance consumer responsiveness and operate more efficiently and effectively. Burberry thrives on a unique, passionate and seasoned management team. Burberry is now a household name in the international market and globalization has enabled the organization to achieve this feat. 2. History Burberry was started in 1856 by a 21-year old apprentice and because of his dedication to quality and innovation, by 1870, the small shop had grown into an emporium. From its inception, the brand has experienced massive growth and now owns thousand of outlets and franchises throughout England. The company specializes in menswear, womenswear, children’s wear and non-apparel garments. Out of these, the largest share of its revenue comes from womenswear. 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). Burberry was awarded a Royal Warrant by Her Majesty Queen Elizabeth II in 1955 and by 2002 it had launched its exclusive ‘Art of the Trench’ made to order trench coat service. Through constant innovation strategies the company is moving toward more balanced collection in terms of design, style and quality. They have streamlined their operations by moving towards focused collection. Their policy of quick expansion is supported by the use of latest technology to make their operations more efficient. The global economic recession and the competitive business environment have forced Burberry to review its business environment. 3. PESTEL Analysis 3.1 Political – The UK has a stable and productive environment for doing business and is a part of the world’s largest trading entity. The unnecessary barriers have been removed and there is less red tape which enables businesses to take advantage of the European markets (UKTI, 2007). The regulations are streamlined and there is greater recognition of the licences in other European countries. 3.2 Economic – Global recession has impacted the purchasing power of the people. Burberry’s profits have declined which is evident from the Group’s income statement for the year showing a profit of £99.8m as compared to £170.9m that were earned a year before. This was a decline of approximately 41 percent. 3.3 Social – Due to reduced consumer spending, the clothing and luxury market has been affected. People are moving towards casual and cheaper clothing. However, in the luxury segment, people they purchase luxury goods for self-identity and well-being, and it must fulfill their emotional needs (Cheng, 2006). The luxury product market has increased manifold. Nevertheless, the fashion industry is marked by short life-cycles, high volatility, low predictability and high impulse purchasing (Christopher, Lowson & Peck, 2004). The fashion conscious consumers expect and thrive for constant change. 3.4 Technology – Burberry has making use of technology in their operations as well as in marketing. They use e-commerce to develop and grow while using technology even in its supply chain management. 3.5 Ethical – Climate change is a major issue in the UK and the clothing industry has been held responsible for damaging the environment (Rouse, 2009). The UK clothing and textile sector produces about 3.1 million tonnes of CO2, two million tonnes of waste and 70 million tonnes of waste water per year. Approximately 1.5 million unwanted clothing end up in landfill every year. Consumers too want sustainable clothing and the industry has to comply with such demands. However, Burberry has devised its ethical trading policy based on Ethical Trading Initiative Base Code and other key International Standards such as the ILO fundamental conventions (Burberry, n.d). Burberry recognizes and respects all the different national cultures, laws, norms and traditions in its supply chain. They feel by working together they can strengthen their business and improve the quality if life of the people who they come in contact with. They have also been able to reduce Carbon Dioxide (Co2) emissions by 13 percent from the company’s head office building. 3.6 Legal - Burberry has to comply with the regulations and they were questioned when they decided to shut one plant in UK and send manufacturing jobs overseas (Stone, 2007). As the company was running in profits they could not justify their decision of sending jobs overseas and hence were not permitted to shut down the unit. Thus, while the demand for the products exists, it has been affected due to economic recession. Moreover, the company cannot ignore or supersede the legal regulations and the external pressures. They have been following an ethical stand and trying to contribute towards a greener environment. 4. Porter’s Five Forces 4.1 Threat of new entrants The fashion market has been revolutionized as the super markets have entered the apparel sector. The time starved customers can now purchase cheap clothing instead of visiting high street shops. This has turned the UK fashion market and luxury market upside down. The fashion conscious now follow the mantra – “buy it, wear it and chuck it” (Mesure, 2007). 4.2 Bargaining power of buyers The bargaining power of buyers is high because of the competitive business environment. As entry is not restricted and easy to manipulate, the bargaining power of buyers is high. Because of this, Burberry had to change its strategy in 1997 as it had a narrow customer base comprising of middle aged, fashion-conservative men (Moore & Birtwistle, 2004). They had to revise their business model and made changes to attract the young, fashion-forward customers. 4.3 Bargaining power of suppliers For a few of the firm’s product categories, they rely on small number of suppliers and hence the bargaining power of suppliers is high. Most of the firm’s business is being carried out in Japan and hence they have over reliance on a few suppliers. 4.4 Competitive rivalry Competition is intense as there are several fashion retailers that are in the foray. Moreover, price is least important for the fashion conscious customers. Zara, the Spanish apparel retailer has made a presence for itself by implementing the use of technology and responding to the changing demands faster than any other retailer in the region (Mesure, 2007). M&S has also changed its business model. 4.5 Product and technology development In the fashion industry, retailers are using innovative techniques not just in developing the product but even in the marketing communications mix. Product styles and timing are being customized to generate better customer satisfaction. Retailers are concentrating on offering clothes deigned exclusively for men as environmental changes have redefined what it means to be a man (Bakewell, Mitchell, & Rothwell, 2006). Clothing for every segment, every season is being produced to cater to every market and every generation. Store image also hold importance in determining positioning strategies and the retailers attempt to project an image that suits the target customer’s self-image world. This could lead to higher customer loyalty. However, merely store front strategy is not sufficient. Topshop and Gap adopted the same store front but Topshop faired better due to its quick response time (Newman & Patel, 2004). They had a less aggressive technique but they did not leave any gap between customer expectations and marketing objectives. The threat of new entrants is high and so is competitive rivalry. Thus the bargaining power of the buyers is also high. This means that Burberry needs to have a point of differentiation and hence sustaining competition would rely on competitive advantage. 5. Conclusion and Future Direction Challenges before Burberry are many and they have to bring about certain changes to fit with the current business environment. They need to re-structure the supply chain strategy so that they are not reliable on a few suppliers, thereby reducing the bargaining power of suppliers. The company, as of now is a multi-million dollar company, facing intense competition from other firms and fighting recession. However, some of the techniques adopted by are so good that many other companies are also adopting them and learning from Burberry’s implementation of these techniques. (Daft, 1994) Since the consumer demands sustainable clothing, they should also ensure that in outsourcing manufacturing, they do not engage in sweatshops or child labour. Burberry is focusing on enhancing its image and thus it has stepped up its PR activities. They have widened their customer base and have clothing for every segment. However, they need to focus on in-store positioning so that they are able to attract the different customer segments. Since consumers have become conscious of sustainable clothing, they should try and cater to this demand as well. However, the youth wants value for money and they look for emotional value like pleasure, excitement and aesthetic beauty. The elders try to balance the tangible and the intangible value with price (Salzman, 2009). Their purchases are based on deeply held core values. Thus, Burberry would have to design the products with these perceptions in mind. Even in the luxury segment, culture plays a vital role in purchase decisions. Cultural values are significant in determining the luxury system of symbols and these differ across nations. The American demonstrates their personal affluence through consumption while for Europeans wasteful expenditure diminishes the quality of life (Seringhaus, 2002). The west believes in self-concepts while the Asian economies have a group culture and follow group norms (Sriviroj, 2007). These values influence the purchasing habits of the people. Hence, a brand that is self-evident and communicates that life can be full of challenges, is more appealing to the youth in Europe but for the Americans comfort is more important (Parker, Hermans & Schaefer, 2004). The products and positioning has to be people-centric and technology should be used to understand the minds of the consumers. Thus, presence on Facebook and other social networking sites would enable the retailer to know the changing preferences and would enable them to respond quickly to the changing demands. Moreover, segmentation would help in making the right offerings to the different markets. Thus, even though Burberry has been innovative, they need to be alert to such influences. They have been impacted by the economic recession but in desperation the strategy has to be very carefully devised and not to get over the crisis in the short-term. References Bakewell, C., Mitchell, V., & Rothwell, M. (2006). UK Generation Y male fashion consciousness. Journal of Fashion Marketing and Management. 10 (2), 169-180 Burberry. (n.d.). BURBERRY ETHICAL TRADING POLICY. Retrieved online 12 May 2010 from http://www.burberry.com/downloads/pdfs/EthicalTradingPolicy.pdf Burberry Group. (2010). Official Website. Retrieved online 05 January 2010 from http://www.burberryplc.com/bbry/corporateprofile/history/ Burberry Group Limited. (2008). Annual Report of 2008. Accessed: 5 January 2010 Cheng, C. (2006). The Impact of Brand Image on Consumer Behaviour of Luxury Goods of Fashion Industry in China. Retrieved online 12 May 2010 from http://edissertations.nottingham.ac.uk/1585/1/07MSclixss24.pdf Christopher, M., Lowson, R., & Peck, H. (2004). Creating agile supply chains in the fashion industry. International Journal of Retail & Distribution Management. 32 (8), 367-376 Cliff Notes. (2001). Principles of Management. Published by Cliffs Notes Collin Bamford. (2003). Economics. Oxford University Press Draft, R.L. (1994). Management. The Dryden Publishing Mesure, S. (2007). Fashion must clean up its act, or be left behind with last seasons look. New Statesman. 8 October 2007, 14-16 Moore, C.M., & Birtwistle, G. (2004). The Burberry business model: creating an international luxury fashion brand. International Journal of Retail & Distribution Management. 32 (8), 412-422 Newman, A.J., & Patel, D. (2004). The marketing directions of two fashion retailers. European Journal of Marketing. 38 (7), 770-88 Parker, R.S., Hermans, C.M., & Schaefer, A.D. (2004). Fashion consciousness of Chinese, Japanese and American teenagers. Journal of Fashion Marketing and Management. 8 (2), 176-186 Rouse, B. (2009). Global warming bigger problem than economy. Retrieved online 12 May 2010 from http://www.independent.co.uk/environment/climate-change/global-warming-bigger-problem-than-economy-1627798.html Salzman, M. (2009). Boomers and the Future of Luxury Brands. Retrieved online 12 May 2010 from http://boomers.typepad.com/boomers/2009/01/boomers-and-the-future-of-luxury-brands.html Seringhaus, F.H.R. (2002). Cross-cultural exploration of Global Brands and the Internet. Retrieved online 12 May 2010 from http://www.impgroup.org/uploads/papers/504.pdf Sriviroj, S. (2007). Purchasing Luxury Goods: consumer behaviour of international students in the UK. Retrieved online 12 May 2010 from http://edissertations.nottingham.ac.uk/1585/1/07MSclixss24.pdf Stone, A. (2007). Burberry checked over move to China. Retrieved online 12 May 2010 from http://www.independent.co.uk/news/business/news/burberry-checked-over-move-to-china-430490.html UKTI. (2007). UK Trade & Investment. Retrieved online 12 May 2010 from http://www.ukinvest.gov.uk/index.html APPENDIX SWOT ANALYSIS Read More