The Sustainable Strategy Analysis of Burberry - Case Study Example

The Sustainable Strategy analysis of Burberry. ID:5285897 Chuanqi Jia Module: M002LON - Sustainble Strategy - D10 Executive Summary Burberry, as a top British luxury brand in dresses has been able to make the recommendable growth prospects that it has based on the adoption of an appropriate strategy. Just as in any other organisation, it is these strategies that have helped define the scope and direction of the company over the long term. Considering the ever changing economic environment in which firms operate, the achievement of corporate success to Burberry will be much dependent on its configuration of the available resources and the competences, so as to fulfill the expectations of the shareholders. The essence of a strategic analysis is that it would enable the firm to assess its long term objectives and plans, as well as ensure their success and profitability (Henry, 2011.p.145-149). The core aim for this study shall be to analyse the sustainable strategies available to Burberry in relation to the future options for growth. The essence of this analysis is in line with the recent economic downturns of the year 2009 that had consequently put intensive pressure on Burberry despite having had strong financial base in the past decade. Having considered and reviewed the available strategies, this case study will provide a range of options from which the firm’s management can choose from and capitalise upon with the aim of enhancing its profitability. However, the practicability of these strategies will be achieved without the need to erode the exclusive and aspirational qualities that are significant to the world of luxury. To realise the above concepts, the study shall employ PESTLE and SWOT analysis models to grasp the environment (internal and external) that the firm operates in, the organisation of the firm, the availability of resources and the future opportunities for development based on its competences. Burberry has had a high reputation in its products globally, all of which were designed with a generous and elegant British style (classic plaid and unique fabrics), and also based on a product pyramid that offers a hierarchy for defining the components in their respective unique brands and distinctive identities. After 150 years of development Burberry has became a timeless brand in the world. (Burberry Heritage, 2013). Table of Contents Module: M002LON - Sustainble Strategy - D10 1 Executive Summary 1 Table of Contents 2 1.Introduction 3 2.Analysis of the external environment of Burberry 5 UK had an approximated population of 63.2275 million people in the year 2013 (Publish date, population UK), most of whom are of a youthful age. Burberry, as a traditional brand in the UK, has sought to make its British style become popular among the youth, who are considered largely involved in the fashion market. 6 d.Technology analysis 6 High-technology makes the world becoming more different since people can now purchase products through online means rather than the traditional shop of Burberry. The purchase through the internet is most preferred considering that it comes with free delivery services. High-technology makes shopping more easy, convenient and comfortable. Further more, online communication can further support after-sales services to become more effective (Schermerhorn, 2012.p.79-83). 6 e.Environment analysis 6 f.Legal analysis 6 Britain is a developed nation that has, as well, a sound legal system that makes all enterprises have a healthy and sustainable development in United Kingdom. 6 3.Internal environment of Burberry analysis 6 The same as buyer bargaining power, large numbers of luxury brand in the United Kingdom. Therefore, it is very fierce in this market (Gerry Johnson, Richard Whittington, Kevan Scholes, 2011) 7 4.SWOT analysis 8 (Gerry Johnson, Richard Whittington, Kevan Scholes, 2011) 9 Additionally, it can be seen from this SWOT analysis that Burberry has lots of strengths and opportunities. First, Burberry is a local brand in the UK; hence, it can get more support from the government and citizens than other brands. The unique design, classic plaid is one of the marks of British style, and also customers can buy perfume, scarves, furs, shoes, sweaters and many other area’s product in Burberry. Second, Burberry has numerous opportunities for expansion given that the numbers of loyal customers to their products are increasing; thus, offering support to the brand of Burberry. They also have a very stable and relaxed political environment in the UK, to make sure development is attainable. Subsequently, the firm has a high and modernised technological support to reduce production costs, enhancement of fast delivery, and affording of a perfect after-sales service (Besanko, 2010.p.412-420). 9 1. Introduction Burberry, a brand luxury firm in fashion was founded in the year of 1856 by a 21-year-old dressmaker called Thomas Burberry in the city of Basingstoke, North Britain. The outdoor clothing shop of Thomas Burberry won a number of loyal customs as the excellent quality, innovation of fabrics using and the special design of the jacket. Burberry has a high reputation in trench coats as an iconic product that was developed in the year 1880, and largely worn during the Boer War by the British Officers (Burberry Heritage, 2013). The company’s growth strategies over the recent years have seen it expand its brands from one range of products to six, and in the global market, they have managed to firmly establish themselves as a leader in the luxury fashion products. However, in the recent past, the firm has been faced by uncertainties in growth owing to the economic downturn of 2009 and a crisis with the chavs. The latter greatly impacted on the image of the firm and to be able to regain its former glory, it would be required of it to re-evaluate its strategic position and gear towards a direction that would propel their growth objectives (Graham, 2005.p.100-109). Currently, the firm defines its strategic position by five strategic themes that are key to its operations. These are leveraging of its franchise, intensification of the development of the non-apparel, acceleration of its growth through retail markets, making investments in markets that have not been penetrated and the perusal of operational excellence. These five themes have been used over time by the firm but, in light of this study, I shall present how best these themes can be applied for exemplary growth in the company. This shall entail both SWOT and PESTLE analyses as already highlighted above. The use of a PESTEL model will aid in the analysis of the firm’s external environment from the viewpoint of political, economical, social, technical, economical and legal areas, and their effect on Burberry. The Porter’s five forces model will compliment the PESTLE model by grasping the effect of the internal environmental factors towards Burberry’s sustainability (Cheverton, 2004.p.236-241). Furthermore, the analysis through these models shall identify brand positioning, enterprise positioning, customer positioning as practiced by the firm. The use of a SWOT analysis will seek to recognise Burberry’s economic strengths, weaknesses, opportunities, and threats to growth (Kapferer & Bastien, 2012.p.85-92). This case study report will conclude with an argument of commendations for implementing the sustainable strategy report for Burberry Plc. 2. Analysis of the external environment of Burberry a. Political analysis Britain is a developed country with polite people, mature market, stable and relaxed political environment. This political environment gives Burberry a big opportunity to develop and grow given that the taxes and government legislation related to fashion industries are constructive and not destructive (Sempels & Hoffmann, 2013.p.125-130). b. Economic analysis The United Kingdom’s GDP had increased by nearly $200billion (from $2173.154 billions to $2440 billions) from 2010 to 2013 (Trading economics.com, United Kingdom GDP). As such, the economic factors such as GDP perform an indispensable part in the determination of the market conditions that are suitable for growth in a company such as Burberry. This is because a stable and good economic environment can stimulate the buying appetite of customers. However, the economic recession and downturns are not healthy to business and Burberry recognises that sales can be affected (decline) as a result of such external factors. c. Social-cultural analysis UK had an approximated population of 63.2275 million people in the year 2013 (Publish date, population UK), most of whom are of a youthful age. Burberry, as a traditional brand in the UK, has sought to make its British style become popular among the youth, who are considered largely involved in the fashion market. d. Technology analysis High-technology makes the world becoming more different since people can now purchase products through online means rather than the traditional shop of Burberry. The purchase through the internet is most preferred considering that it comes with free delivery services. High-technology makes shopping more easy, convenient and comfortable. Further more, online communication can further support after-sales services to become more effective (Schermerhorn, 2012.p.79-83). e. Environment analysis The United Kingdom pays more attention to solving environmental problems since a beautiful environment can attract lots of customers to travel and buy products in this area. f. Legal analysis Britain is a developed nation that has, as well, a sound legal system that makes all enterprises have a healthy and sustainable development in United Kingdom. 3. Internal environment of Burberry analysis The entrance of the clothing industry has a low demand while to build a new brand with British style like Burberry is a difficult work; luxury brand built is not as easy as people think. There are several internal factors that have direct impacts on the sustainability of forms and Burberry recognises to these internal environment factors as discussed below. a. Supplier power Lots of Burberry’s raw materials for making its products are made in China. Since the supplier has a low bargaining power, it becomes difficult for Burberry to access lower supply costs. b. Threats of substitutes (fake) This is the biggest problem to all luxury brands whose design copies after the unique design and expensive price of Burberry. These substitutes retail at lower prices thus, likely to deceive consumers to be original products of Burberry when in actual sense they are not the marks of luxury as presented by the company. These substitutes attract lots of customers’ purchasing desire. Since they can not afford the original products, probabilities are that they will resolve for the substitutes thus, drive the firm out of the market. c. Buyer bargaining power Burberry is a local brand in the UK while it has many competitors like Dior, Hermes, Chanel, Versace and other luxury brand. These other firms define the purchasing power of products since some offer low prices so as to attract more customers (Billsberry, Charlesworth & Leonard, 2012.p.105-112). This is likely to leave Burberry out of business. d. The rivalry among competition sellers The same as buyer bargaining power, large numbers of luxury brand in the United Kingdom. Therefore, it is very fierce in this market (Gerry Johnson, Richard Whittington, Kevan Scholes, 2011) 4. SWOT analysis Strength analysis Weakness analysis Local luxury brand in the UK. Unique design.(classic plaid and unique fabrics) Innovation Different areas (perfume, scarves, furs, shoes, sweaters) British style impression (classic plaid) Expensive price Fake brand Customer positioning Enterprise positioning (luxury or not?) Opportunity analysis Threat analysis Loyal customer (loyal brand) VAT refund (lots of customers can refund tax when they going back to theirs hometown) Economic growth in the UK.（GDP growth） Stable and relaxed political. Technology support (faster delivery, low transfer cost, low product cost and etc.) Fake brand (same as weakness) Lots of competitors (Dior, Hermes, Chanel, Versace and other luxury brank) Low purchasing desire in decreasing economic environment. Medium disposable income and expensive product price. (Gerry Johnson, Richard Whittington, Kevan Scholes, 2011) Additionally, it can be seen from this SWOT analysis that Burberry has lots of strengths and opportunities. First, Burberry is a local brand in the UK; hence, it can get more support from the government and citizens than other brands. The unique design, classic plaid is one of the marks of British style, and also customers can buy perfume, scarves, furs, shoes, sweaters and many other area’s product in Burberry. Second, Burberry has numerous opportunities for expansion given that the numbers of loyal customers to their products are increasing; thus, offering support to the brand of Burberry. They also have a very stable and relaxed political environment in the UK, to make sure development is attainable. Subsequently, the firm has a high and modernised technological support to reduce production costs, enhancement of fast delivery, and affording of a perfect after-sales service (Besanko, 2010.p.412-420). On the other hand, they have weakness and threats. The first weakness is that the unique impression (classic plaid) brings a Visual fatigue to customers. Second, fake brand also bring a huge negative impact to the whole industry. In another sense, customers have questions on the positioning of the firm as to whether it is a luxury brand or not? This has confused lots of customers, and if not rectified may continue to do so thus, affecting their sales. Subsequently, lots of luxury brand competitors in the same market make a fierce competition and low purchasing power and desire thus, decreasing the economic benefits of the firm’s environment (Peng, 2014.p.152-160). 5. Conclusions and recommendations The report, in using Porter’s five forces, PESTLE and SWOT models to analyse the external and internal environment of Burberry, outlines the means by which sustainability can be attained in the firm. First, Burberry has a classic design and unique fabric, which is well known in the customer’s mind while unique and classic plaid, will also bring a Visual fatigue to customers. Second, Burberry has a very fierce competition with numbers of luxury brand companies. Third, the UK government offers a mature and stable market to the whole industry, but it also means saturated and intense competition market. As such, Burberry should have a clear strategy for enterprising and customer positioning. The marketing positioning of Burberry between medium brand and luxury brand that will confuse lots of customers when they want to buy medium or luxury brand should be avoided. Another important thing is that, Burberry should to pay more attention to keep within limits fake products. Fake brand could bring a huge negative impact to the whole enterprise; it will affect the credit of enterprises and also will decrease sales volume (Ahlstrom & Bruton, 2010.p.125-130). Finally, this report though external and internal environment analysis sought to find out the advantage and disadvantage, in order to smooth carry out the sustainable strategy, as has been discussed above. Reference list AHLSTROM, D., & BRUTON, G. D. (2010). International management: strategy and culture in the emerging world. Australia, South-Western Cengage Learning. BESANKO, D. (2010). Economics of strategy. Hoboken, NJ, John Wiley & Sons. BILLSBERRY, J., CHARLESWORTH, J. A., & LEONARD, P. (2012). Moving images: effective teaching with film and television in management. Charlotte, NC, Information Age Pub. CHEVERTON, P. (2004). Key Marketing Skills 2 Strategies, Tools and Techniques for Marketing Success. London, Kogan Page. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=227367. GRAHAM, G. (2005). Exploring supply chain management in the creative industries. Bradford, England, Emerald Group Pub. http://site.ebrary.com/id/10103487. HENRY, A. (2011). Understanding strategic management. Oxford, Oxford University Press. KAPFERER, J.-N., & BASTIEN, V. (2012). The luxury strategy: break the rules of marketing to build luxury brands. London, Kogan Page. PENG, M. W. (2014). Global strategy. Mason, Ohio, South-Western. SCHERMERHORN, J. R. (2012). Exploring management. Hoboken, NJ, Wiley, c2012. SEMPELS, C., & HOFFMANN, J. (2013). Sustainable innovation strategy: creating value in a world of finite resources. Uk.burberry.com , Heritage, [online] available from http://uk.burberry.com/heritage/#/heritage/heritage-1800-1 [15 NOV 2013] Tradingeconomics.com, UK GDP，[online] available from http://www.tradingeconomics.com/united-kingdom/gdp [16 NOV 2013] Population UK, [online] available from http://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_totl&hl=en&dl=en&idim=country:GBR:FRA:DEU Gerry Johnson, Richard Whittington, Kevan Scholes, (2011), Exploring Strategy, -Poter’s five forces, (54-60) Gerry Johnson, Richard Whittington, Kevan Scholes, (2011), Exploring Strategy, -SWOT, (74-76, 106-108) Read More