Global Communications For US Brands Like Abercrombie and Fitch - Essay Example

1. The Vice President, Global Communications for US brands like Abercrombie and Fitch (A&F) will frequently take on a local public relations consultancy when launching into a new territory. You are the public relations consultant hired by Abercrombie and Fitch for their UK launch. Prepare a report for the Board to include the following: (i) A discussion of the unique characteristics of the British retail culture, with an analysis of the needs, demands and concerns of the British consumer. British retailers have a good reputation for delivering low prices to their customers. But due to the high cost of rent at High Street shops, most British retailers opted to have “out of town” shopping centres because they have grown in size and their goods require a bigger space. British retailing uses “self-service” where customers select their own goods and take them to the cashier for payment. Purchases are generally made by using credit cards or debit cards because cash is used to buy small items such as newspapers or a can of soft drink Like any other consumer worldwide, the British customer has both rights and responsibilities. Some important rights of the consumer are: 1) the right to choose, 2) the right accurate information, 3) the right to safety and 4) the right to value for money. Being a meticulous consumer, the British customers know where and how to get the best value for their money, and they usually know who to approach when things go wrong. It is essential for any organization who wishes to penetrate the British market, that value does not always mean the “cheapest” or the “most expensive”. It means that the consumers’ perception of it is if the standard or quality is commensurate to the price of the commodity. At the end, it is normally up to the customer to decide whether the price of the goods they are willing to purchase is worth it. (ii) In order to have a competitive advantage; A&F must incorporate the three (3) Cs or the Strategic Triangle by Ohmae. The three Cs are customer, corporate and competitor. In any business strategy, the organization’s primary concern should be its customers. Thus, it is recommended that management should implement an advertising strategy that could reach a larger portion of the market in order to edge out the competitor and penetrate more potential household consumers. However, before launching an entry into any new place, territory or country it would be best to assess the needs and wants of the target market and to know how far the competitor has come. The best advertisement campaign recommended will be a combination of the public information model where media and local press releases will be used extensively to inform the public of the A&F presence and to build wholesome image of whole organization; and the two-way symmetrical model which is a two way communication between the company and the public to sort out conflicts, promote mutual understanding and foster respect between the organization and its target market. Building a strong foundation with its customers in order to gain a better advantage of promoting its products must be the basis of the A&F marketing strategy, because in the long run it will be the customer’s loyalty that would uphold the company’s solvency. 2) A&F’s design Specialism is Classic American Sportswear. (i) Discuss the strengths and risks associated with adopting this design style house. An in-house design style gives the company an advantage of having an effective control on design and innovation processes. Centralizing design by having the appropriate in-house design studies, designers, colourists and design forecasters generally: 1) increases profits; 2) limits allotment of designs contracted to different designers who provides a mixture of unappealing results; 3) makes the brand remain popular with core customers and reduces overhead costs. The risk or disadvantage of adopting such designs generally requires outsourcing in order to meet quality and profitability. But the problem with outsourcing designs is that it becomes difficult for management to oversee that the clothes manufactured are in time to meet the demands of the market. Likewise, product quality often suffers since it becomes poor due to a lot of manufacturers and suppliers involved in the system. Hence, since fashion demands constantly change, A& F must be flexible and should have pre-determined immediate solutions in terms of product designs that could be offered to customers. (ii) With reference to appropriate models, review how A&F can use design across its key categories to: a. differentiate their product b. augment their product offer; and c. diversify their product By using the 4Ps of the Marketing Mix, A&F could generate optimal response from its target market since the factors involved in this model can be internally controlled and adjusted on a need basis to meet the changing needs of the consumers. In order to differentiate their product, A&F must see to it that their products meet the needs of their consumers with regards to functionality, quality and appearance. Since A&F is a branded insignia, it will not be difficult for customers to differentiate it from other brands in the market. But the management must also be aware of the fact that majority of its customers are still price conscious. Meaning discounts and other special offers are still anticipated and sought out even by the most fashion conscious clientele. To augment the company’s product offer, the organization must have other goods or products aside from clothing apparel to sell to their loyal customers. These other products should likewise bear the quality and known trademark of the A&F. Aside from functionality, quality and appearance, these additional products should have a unique kind of packaging with a reasonable time of warranty period to lure customers into purchasing them. By having an in house design system, A&F could easily use its unique centralized design system to commence production of a variety of goods that management deems to be needed by its target market at present times. The fast pace life of today requires a lot of innovative items needed for work and home that could make life easier and better for their customers while enjoying the fact of having a branded product of Abercrombie and Fitch. (iii) Evaluate how A&F design management process supports design throughout its life cycle in order to maintain its value and identify for A&F’s targeted market segment. All A&F’s designs are manufactured and created by A&F’s IDC or Innovative Design Centre, which is solely under the supervision of A&F. This being the case, A&F has control over the exclusivity over its designs that give management the leeway to control profit margins and enhance marketing strategy. Likewise, with the presence of the IDC, A&F has the benefit of saving overhead expenses, raising profit and hindering poor quality replicas of its new designs. In relation to this, the segmentation of the market must allow for resources to be shifted when changes are required. Initially, it is best for the organization to re-examine its customers and make surveys to be able to know what they are really looking for when it comes to brands and designs in clothing fashion. 3) (i) With the use of appropriate tools, evaluate the role of design throughout the A&F brand. By using the Brand Asset Valuator, A&F’s designs for its clothing apparels and other products must have the following aspects: 1) differentiation, 2) relevance, 3) esteem and 4) knowledge. Differentiation pertains to the uniqueness of the brand’s designs that could be easily identified apart from the competitors. Relevance on the other hand is perceived to how appropriate the brand is for its segmented target market. Said designs must conform to variables such as age and current trends. Esteem is about how the brands along with its designs are perceived by its customers through its quality and popularity. Both of these factors vary by country and culture. Consequently, esteem is also about having the pride to wear signature clothing that is one with the upper elite brands. Knowledge of the brand comes in the awareness and understanding of customers with regards to the identity of the design. The true knowledge of the brand and the design associated with it comes from the building of the brand through the different channels of advertisements. By taking all the aforementioned as a whole, the role of design in any clothing apparel comes with its being recognized because it stands apart from others. Designs when taken into a deeper psychological context must inspire the buyer who will wear it by being able to portray an identity that is distinctive and with a class. (ii) Examine how A&F uses design in the broadest sense to reinforce the concept of a “Lifestyle Brand” for their consumers. The A&F product line is considered as one of the “elite” in fashion brands. The design concepts of A&F are distinctive to a point that it usually raises questions and criticisms with regards to what the designs portray within the minds of its loyal customers and the public at large. But since A&F design has an “identity” that is all its own, these are the ones young people normally seek out to buy. The reason behind this is that it is what they want to wear and to be identified with. (iii) The A&F brand has a highly focused position aimed at the wealthy and conservative US college kid, which plays heavily to his/her “attitude” and lifestyle”. As the brand is extended unto international markets, consider the current design strategy. Discuss which elements of the current strategy could be retained and which elements may need to change in order to enhance the Value and Image aspects of the global A&F brand. The current design strategy of A&F personifies the American attitude and tradition. While this may be good for a certain country or market segment, A&F management must consider the culture, tradition, needs and wants of the consumers that are within the international market. While trying to maintain the value and image of its designs/brand it is essential for A&F to integrate designs that their customers prefer in a particular country or place. Needless to say, the personal preferences and characteristics of the American consumer may not be the same as those of the European customers. Section Two – Execution 1) The corporate values statement says that A&F “is founded in creativity, innovation and quality”. (i) Discuss how A&F’s marketing communications strategy contributes to its brand positioning. A&F’s marketing communications strategy must be based on the theory of Trout and Ries on Positioning. According to Trout and Ries “positioning is not what you do to the product. Positioning is what you do to the mind of the prospect”. A&F’s image is built in the mind of its customers. The important thing is how the buying public perceives the product since wearing or buying products from A&F identifies them with the image portrayed by the company’s marketing statement. As such a strong marketing advertisement must have a great impact by identifying competing products and collecting information from sample customers about how the products are currently viewed. (ii) Analyse the extent to which A&F's brand communications may be considered creative and innovative in the context of new media opportunities and the innovative practices of other brands in the fashion industry. In the past communication strategies with regards to brand building and promotion took a certain length of time and a meticulous process to broadcast positioning statements and messages. Communication strategies were done in a variety of ways to reach the target market. However, most companies today turn to the internet for product advertisements, in a rat race to be either the “first or second to launch a successful e-business (Lippincott, p1).” Since time is the essence most companies from various sectors of the industry launch their products or services without having the proper strategy or marketing technique behind it because they are pressed for time. Abercrombie and Fitch along with the other companies whose brands are competing in the global market must consider a stable length of time to bring forth their products into the market and offer them to their respective customers. The creativity or innovativeness of a particular marketing statement must have been developed properly considering that at present the fashion industry is very volatile to quick changes in the demands of consumers. In order to retain value, quality and integrity with its target market, Abercrombie and Fitch must develop a unique communication strategy that could easily be recognized and which could titillate the minds of the buying public to have a better edge against other competing brands in the market. 2) The new Abercrombie and Fitch outlet in London has been described as a “Flagship Store”. (i) Describe and discuss how the company's international retail development strategy differs from that of their core retail operations in North America. Abercrombie and Fitch stores are managed by assigning each store with a grade or tier level (A,B,C, D, E of F) or (1, 2, 3, 4) respectively. The tier levels determine the current clothing selection line that would be sent to the store. Tier 1 stores receive all of the current items in all styles and colours. Lower tier levels are sent less merchandise in a smaller range of sizes and colours. The tier level is independent of its volume allocation because allocation is dependent on the available area of selling space. The Abercrombie and Fitch stores located in North America are located in “A – grade” malls – these are shopping centres that attract most consumers and provides the best sales per outlet. By size and profit the A & F stores situated in North America have a larger space for merchandise in order to accommodate the large number of customers. (ii) Identify one or more models which can contribute towards the understanding of the role of Fashion Brand flagship stores. A flagship store is normally located in prominent or upscale districts where the elite customers prefer to shop. By using the third P of the Marketing Mix strategy which is Place; A & F is following a technique of being available at the right place, at the right time and having the right quantities of merchandise. In order to generate a larger profit margin and to maintain a status quo in the high circles of fashion, A&F's presence in a prominent shopping area is itself an advertisement of the company and its products. (iii) Discuss the critical issues involved in the operation of a flagship store. Operating a flagship store requires an expensive investment in terms of rent, maintenance and advertisement especially through the website. Since flagship stores need to be located at prominent shopping areas, the rent is expected to be higher aside from the costs of needed renovation that is required. The overhead maintenance also needs a larger portion of the company budget to keep up with the upscale requirements of being in a prominent shopping centre. Likewise the maintenance and cost of using the company website in order to reach and inform customers about the new products of the company also requires big budget expenditure. 3) (i) In a period of increasing costs and increasing pressure on margin generation, evaluate with reference to appropriate models and theories, possible efficient supply chain strategies that A&F could adopt to increase their profit and market share. Two efficient supply chain theories that could be adopted by A&F to improve its profit and market share are the Activity Based Costing (ABC) and the Customer Relationship Management (CRM). Activity Based costing identifies cost pools or cost centres within an organization. It assigns costs to products and services based on the number of transactions that takes place in order to provide a certain product or service. With the use of ABC, Abercrombie and Fitch will be able to: 1. Identify its most profitable segment of customers and products. 2. Determine the true contributors and detractors for financial performance. 3. Accurately predict costs, profits, resource requirements that are in relation to the changes in production volumes, organizational structure and cost of resources. 4. Easily identify the basic cause of poor financial performance. 5. Track cost of activities and work processes. 6. Equip managers with cost intelligence to stimulate needed improvements within the organization. CRM or Customer Relationship Management is also a business strategy that touches the whole organization in terms of marketing, sales, IT, finance, production and HR management. The survival of A&F or any company for that matter depends much on its intimate relationship with its customers. No matter how effective the marketing or management strategies are, without the customers who will purchase and support the company's products/services, the organization will become extinct in the long term. Customer care must always be incorporated in the company's values. (ii) How can A&F improve their Corporate Social Responsibility in terms of developing an ethical supply chain? To improve the corporate social responsibility of Abercrombie and Fitch, it must consider the interest of others by taking its social obligations one step farther from its lawful duties. It must voluntarily take meaningful steps to improve the quality of life of its employees, families and the society at large. Since it amasses millions of profits in a single calendar year, some of it must be contributed to good causes or should be given as donations to help out the needy and impoverished communities. (iii) What should be considered when managing suppliers in an extended supply chain to ensure that ethical standards are upheld? To maintain ethical standards in a supply chain (Institute of supply Management, page 1): 1) Suppliers must be streamlined – maintaining a few number of suppliers who are best in their fields are better than having several suppliers whom management cannot agree with. 2) There should be a positive relationship that is enhanced by courtesy and impartiality – respect must be given at all times with all the contacts of the company and all suppliers must be treated fairly according to company regulations. 3) Personal interest should not be integrated in any professional activities in the company likewise in dealing with suppliers for this might be a source of conflict within the organization. 4) Strict adherence to all governmental laws and regulations is a must to avoid legal or pending lawsuits. Cash payoffs or giving of gifts in order to undermine any set of legal statutes within a country or place should not be practised at any cost. Section Three – Control 1) a) A guiding principle of Information Systems Strategies is that firms should not utilise IT “for their own sake”. It is important that eh CIO and his or her team should be able to make a “business case” for its use. (i) Identify the important issues in justifying the deployment of Information Systems and Technologies. The main purpose of information systems and technologies is to support the creation, transmission, retrieval and processing of important information related to the company. This information must be made available to those who need it is a user friendly way with minimum effort. Moreover, the information should likewise be of quality, ensuring that it is fit for the purpose it was created in the first place; and can be relied on to ensure efficient and accurate flow of information. (ii) Using appropriate strategic models describe and discuss Kristin Blum's role and approach as CIO of A&F in relation to the development of A&F's IS&T portfolio and its value to the company. The Marketing Mix is an effective strategic tool because it could be modified to meet the changes that occur within the volatile world of fashion retailing. By incorporating the fourth P or promotion criteria of the marketing mix, Kristin Blum and her team must acquire the proper advertising media to be able to inform or educate A&F's chosen target market about the company and its products. Taking Kristin Blum's role as a CIO of A&F, it is her responsibility to engage the company with a professional IT provider that could provide a broad range of solutions and technology across A&F's entire retail network. By having a viable and dependent IT networking system A&F could maintain its position in the fashion business by allowing the organization to maintain its commitment in bringing world class shopping experience to their consumers (Oracle, 2007). b) The A&F Board is faced with several systems which require significant investment. Once the CIO has made a business case, explain how the Finance department would evaluate their proposals to choose between the different options and ensure that the best is use is being made of the company's financial resources. An IT investment is very costly and in involves a lot of time. That is why the finance department must evaluate any IT proposal based on the following (Idriskill, page 1): 1. The IT system is to be built by a knowledgeable professional from a reputed IT company. And their proposal should include and focus on the company's growth, accessibility and functionality for the next 12 to 36 months. 2. Consider a server that has capability of file sharing and e-mail that can make a network run efficiently – meaning it should have high productivity and requires less maintenance where data must have an online back-up aside from tapes and CDs). 3. An IT system must have firewall installation for lock and security. 4. Enterprise class anti-virus protection with a spam filter service that reduces spam to 98%; hold e-mail for several days; provide access during an outage. 5. Must be able to provide work access – when working from home, while travelling or for the remote work force. 6. Should have a good IT maintenance and monitoring plan where the system is checked and updated at regular intervals for better and efficient productivity. 7. Must have a website in addition to the above requirements where customers and staff could view and access information. c) A&F's business model is based on flexible working. From an HR perspective, analyse the main issues associated with flexible working. From an HR viewpoint the issues associated with a flexible working scheme are the following (Flexible Working, n.d.): 1. Will it help retain staff? 2. Will it attract staff into areas of shortages? 3. Help build a more diverse range of skills within the team? 4. Help balance staffing levels and activity levels more efficiently? 5. Improve morale? 6. Help to reduce sickness and absence rates? 7. Enable staff to extend their working careers? 8. Does it meet the standards of a responsible employer? A flexible working pattern may be the answer or the solution to having a well balanced career and family life. However, there are also disadvantages like will the cut short working time payment be enough to answer household expenses? Should employers opt to have the flexible working plan, the best interest of the employees must always be taken into account (Flexible Working n.d.). 2) (a) A&F have been widely criticised in the press about their perceived negative attitude to diversification of employees in the workplace. To counter these allegations and ensure that the company complies with EU legal requirements, discuss the areas of Human Resource Strategy which need to be investigated. The following areas of Human Resource Strategy must be given importance (Comprehensive Performance Assessment, pp. 1-5): 1. Recruitment and Retention (including reward and recognition) – fairness and equality must always be practiced within the organization's work areas. Recognition of “a job well done” must regularly be rewarded with approval. Employee turnover must not be fast paced. 2. Organizational Development – the company must make use of the intellect and skills of its current employees for a more flexible and high quality workforce. 3. Employee Relations – The organization should have flexible working conditions and employees must get their proper dues in terms of monetarial payments. Communication should always be open between the staff and management to have a workplace that is conducive to a healthy working atmosphere. 2) b) The case study draws parallels between the “anti-establishment” marketing and promotional activities of A&F and FCUK, citing amongst other things, print media such as the A&F Quarterly. With a focus of Information Management, compare and contract the approach taken to the use of new media technologies by A&F and French Connection. Information management requires a rigorous task of being able to provide information through the use of an IT system through a computer software website. Both A&F and French Connection use the internet to reach their customers worldwide to promote their product line. While A&F has taken a more loud and flamboyant approach in its promotions and advertisements, French Connection has taken a more sedate and conservative form of approach in its global expansion carefully considering ventures and opportunities. 3) a) In A&F's drive to internationalise, the London store is viewed as a stepping stone for another 20 – 30 flagship stores across Europe. November 2007, it was reported in the trade press that Dublin was the most likely site for the next European flagship store. A site has been identified in Dublin, just off Grafton Street. The building is historic and would yield c10,000 sq. ft. of trading space. Annual returns on the new store are expected to be 12% with a standard deviation of +/- 1.2%. the correlation between the Dublin store and the current A&F portfolio (Corr.pi) is +0/56. The average rate of return on the current A&F portfolio is 15% with a standard deviation of +/- 1.5%. The risk free return on capital is 6%. (i) Evaluate this project, making recommendations whether to invest in this Dublin store or not show your workings. Using the required rate of return formula: Where: Ke = Required rate of return Rf = Risk-free rate B = Beta coefficient Km = Expected return for common stocks in the market (Km-Rf) = Equity risk premium (ERP) Ke = Rf + b (Km-Rf) = 6% + 1.2 (12% - 6%) = 6% + 7.2% = 13.2% Based on the above computations I would not recommend that A&F invest on the Dublin store because the return computed is lower than the current average rate of return on the A&F portfolio. (ii) Explain why A&F would use the CAPM model instead of relying wholly on conventional capital investment appraisal methods. A&F should use the CAPM model because it demonstrates how investors will be compensated through time value of money and risk. The time value of money shows how the investors are going to be compensated after investing their money for a certain period of time. CAPM will also show or calculate the additional amount of investment that investors need to offset or to take on any additional risk from the investment. The expected return of a security or portfolio must be equal to the rate on a risk free security plus a risk premium. If computations show that expected return does not meet or is not higher than the expected return, then the investment should not be undertaken. (iii) Discuss the additional financial complexities faced by A&F as they open retail operations in countries where the USD is not the main trading currency. In countries where the U.S. Dollar is not the main currency of trade, A&F is subjected to political and economic factors that may affect their capital, investment and profits. It must be understood from a political point of view, that all exchange rates for countries that do not use the dollar as their main currency, all exchange rates as susceptible to government instability (Foreign Exchange Education Centre, page 2). Economically speaking, the fluctuation of exchange rates can have a very big impact on the revenues of A&F because of a specified exchange range controlled by the countries' central bank (Foreign Exchange Education Centre, pp. 2 – 3). Hence, forecasted returns for the A&F portfolio are not accurate due to the aforementioned factors. b) In addressing international development, the case study briefing provides the following quote regarding the apparent uniformity of A&F's home market: “The United States has more cookie cutter stores and assortments but in other places, it gets more complex...” What implications might A&F's drive to internationalize have for its Information System Strategy? The effect of internationalizing A&F's Information System Strategy provides a broad range of economic and commercial opportunities where a free flow of information on various fields is an advantage. But while this is true for more technologically advanced countries, A&F in its drive to inform globally through e-media must take into consideration the diverse cultural background the company's information dissemination could penetrate and affect. Approaches done in terms of on-line statements and advertising should vary depending on country, culture and tradition (UNESCO, pp 1-6) in order to still uphold the value and image of A&F. References Comprehensive Performance Assessment. (2006) Human Resources Strategy Retrieved on May 15, 2008 from http://www.salisbury.gov.uk/human_resources_strategy.pdf Flexible Working (2007, May) Retrieved on May 14, 2008 from http://www.wsh.nhs.uk/IWL/Flexible%20working.htm Foreign Exchange Education Centre (n.d.) Dollar Euro Currency Exchange Retrieved on May 14, 2008 from http://au.biz.yahoo.com/forex-education/dollar-euro.html Management Overview. (2008, March 25) Retrieved on May 14, 2008 from http://www.12manage.com/index_expert.html Nayer, Kim. (2001, December 27) Globalization of Information: Intellectual Property Law Implications Retrieved on May 14, 2008 from http://www.firstmonday.org/issues/issue7_1/nayyer/ Sindell, Kathleen, Ph. D. (2008, January 28) Required Rate of Return Formula Retrieved on May 14, 2008 from http://www.kathleensindell.com/requiredrateofreturn.htm UNESCO and an Information Society for All (1997, January 21) Retrieved on May 115, 2008 from http://www.unesco.org/webworld/telematics/gis.htm Wilke, Richard. (2000, June 14) Who.com: The Race to Build Internet Brands Retrieved on May 15, 2008 from http://www.lippincottmercer.com/insights/a_wilke01.shtml Read More