Marketing Management of Abercrombie & Fitch - Case Study Example

 Abercrombie & Fitch Table of Contents Introduction 2 Value Chain Analysis and Its Importance 3 Evaluation of Value Analysis of A&F Co. and Its Result 6 Internal analysis 8 External Relationship with Suppliers, Intermediaries and Customers 10 Conclusion 11 References 13 Introduction Abercrombie & Fitch Co. (A&F) is an American based company listed in the stock exchange of New York. It is basically a retailer of casual wears and accessories. Presently it consists of four flagship brands and they are Abercrombie & Fitch, Abercrombie, Hollister and RUEHL. The company was established in the year 1892 by David Abercrombie and was later joined in by Ezra Fitch. There was a change in management in the year 1992 and it came out strong as a casual life style store mostly targeting the youth. It focuses mainly to the age group in between 18 to 22 college going students both male and female. It made constant efforts to cater a wider market, the consequences of which were the launch of the brand ‘Abercrombie’ in 1998 that catered the kid segment within the age group of 7 to 14. Another effort was made in the year of 2000 with the launch of Hollister targeted at the teens within the age group of 14 to 18. Again it made a try with the launch of the RUEHL brand which was generally targeted to the age group of 22 to 35 in the year 2004. The products though are catered for different age groups but have a similar orientation that is to cater the markets of those people both male and female, who are fashion aware. It’s not just an apparel brand but a lifestyle brand. They have established themselves as a cool, fashionable and trendsetting lifestyle store. They have slowly and steadily added products and accessories in their range that cater to their target groups like music, jewelries, fragrances and even more. It has now established it self as one of the major market players of lifestyle merchandising (Saint Mary’s College, n.d.). Value Chain Analysis and Its Importance The main aim of value chain analysis is to maximize the value of a related product while reducing cost. It gives the firm a competitive advantage over its competitors. The main objective of the firm is to perform better value chain than its competitors. Most importantly, the value chain relates the value of the firm’s activities with its main functional and operational parts. After considering the main activity then the assessment of involvement of each and every resource, adding value to the business is made. A value chain analysis is conducted by splitting the function of the organization into primary and support activities. Primary activities mainly concern activities that of mostly related to production whereas the support activities concentrates on those which determines the efficiency of the organization in relation to another. According to Porter, the primary activities are mainly inbound logistics, operations, outbound logistics, marketing & sales and service. • Inbound logistics mostly is concerned with the supplier and their powers. It also concentrates on storage and warehousing. • Operations are the activities related with the production of the product or may be services. These operations can be divided into processes in case of complex products as in case of automobiles, or sometimes even in the service industry. • Outbound logistics deals with the distribution of the final end product from the manufacturing section or the warehouse to the consumers. • Marketing and sales is the most important function in this range. It basically deals with the sale of the products. It has multiple dimensions, it not only is responsible for the sales but also for understanding and analyzing the consumer needs and wants and thereby prepare a strategy so as to suit the market needs. Various tools are used at this level to promote sales. • Service is one of the basic responsibilities of the marketers in today’s age. In most cases, there is requirement for pre installation demonstration or the after sale services, so as to have better consumer satisfaction and developing high brand image. The secondary activities are mainly procurement, human resource management, technology development and firm infrastructure. • Procurement is the function that deals with purchase of material. It is mostly concerned with buying the best quality raw material with the lowest of prices • Human Resource Management basically deals with the selection, training, appraisal and retrenchment. It is one such resource very important for the success for the organization • Technology Development is one such sphere which has become very important for an organization to stay competitive in the market. The company should have a perfect knowledge about the technology they are using and also the related technologies in the market. • Firm Infrastructure includes that of the both physical and environmental conditions. It may include the infrastructure of the store and may also include the planning and control systems (Porter, 1998). Evaluation of Value Analysis of A&F Co. and Its Result Abercrombie & Fitch Co. has been a major player in the lifestyle range of products. It takes pride in its selection or assortment of merchandise. Also it has been very active in promotion of its brand in different ways. The company offers mostly casual garments, which is highly acclaimed among the younger generation both male and female. But additionally the company has engaged itself with products related to the youth. Thus, it offers fragrance for both the genders. Perfume 8, Classic and Wakely are few of the fragrances available in the market from A&F Co. The company has variety from its signature fragrances to that of high end which are popularized to highlight the essence of the company. Thus, it is easily understood that the sale of this brands and other related products are targeted at creating a niche for this brand. This also helps in developing brand image and brand recognition. According to the Porter’s value chain analysis the primary activity had basically four segments. For A&F Co. the most important activity is that of sale of products, because that is their core business. And they have been doing this activity quite well through their retail chains all over the world. But this is not the only reason for their success or their competitive advantages. The success has been majorly through the secondary activities also called support activity, performed by the company. First and foremost, the company has engaged itself in the brand protection program. It was very much necessary for the brand for several important issues. First issue was regarding the fact that the company had a number of products to be offered to its customers from apparels to accessories and music. Second important thing is that the growing status of the company, which will attract duplicities from other small manufacturers. Thus, this program is basically aimed at establishing the brand, ascertaining that the consumers get their relevant products simply without any hardships or fallacies or any counterfeits. The other important activity has the unification of the subsidiaries. There are many brands which are still managed by the latter group e.g. brands like Gilly Hicks which offer underwear and lingerie to women, aged over 18. RUEHL 925 also is targeted to woman aged above 22 in the leather bags and purse arena. Hollister is also operated under the A& F umbrella. Again, another trademark of A&F Co. is that they use their employees as their models. It has a double sided effect positive effect. Firstly, it acts as a promotional tool, instead of using known & famous faces they use faces which are vibrant yet new. This strategy makes the youth get much more attached to the brand. And secondly, this strategy helps in making the firm stronger by having satisfied employees in the team. Thus the human resource in the organization is much stronger and firmer. Similarly, another important attribute of A&F Co. is that it has utilized a lot of resources to increase its brand image not only in the field of business but also in the society, which directly or indirectly affect the business. For instance A&F Co. usually sponsors Inferno Elite racing team in cycling races, with no profit motive. It is also creating a brand image by giving scholarships to students in the high school or college, so that the students have a favorable image of Abercrombie & Fitch in their mind (Artclebase, n.d.). Internal analysis Internal analysis is mostly concerned with the assets, competencies and innovations. It is generally conducted to verify whether the company is faring well in relation to the external environment. Statistics suggest that the A&F Co. has been faring well in the world market. The increasing number of stores speaks for itself. Their competency has always been stylish casual wears, and they have lived up to the expectation of their customers by providing them with cool and hop wears. Thus in relation A&F Co. have fulfilled in meeting up to their legacy as a lifestyle designer store. Another important strategy adopted by them is to be different through their marketing campaigns. Though their marketing campaigns are not product centric but the sexual appeal that the advertisements bring with is very much appreciated world wide. It makes them stand apart from another brand. The financial figures also prove that they have been doing well in the last few years apart from fewer brands which did not get much customer attention as the like of RUEHL no. 925. But in totality, A&F Co. has entire asset of $3.54 billion and has done business of $ 272 million in the last financial year. Hence, it shows the motive of the company to expand within few years and establish itself as the leading brand in consumer lifestyle retailing (University of North Carolina, n.d.). When the question of strategic analysis arises, one very important tool is that of SWOT analysis because only through it, a firm can understand its position in the market. So in case of A&F Co. the strengths of the company are their solid financial base, their marketing strategy and position and most importantly their brand equity and brand loyalty of the customers. The weakness is generally high cost and the products are targeted to only a specific age group. The opportunities are the growth of e-commerce, increase in product lines and the growing markets whereas the threats are major competition from other apparel stores like the GAP and Coach, the increasing cost of materials and change in customer preference (Danca, n.d.). External Relationship with Suppliers, Intermediaries and Customers To be among the top brands in the world, it is very important for the company to have a good rapport with the suppliers, intermediaries and the customers. All the three factors are interrelated and interdependent. A break in relation with any of these factors can hamper the whole business. Suppliers are the providers of materials. If the materials are not provided in the right time, then manufacture would hamper and so would be the image of A&F Co. Again it is the duty of the company to see that there is no quality issue and also to fix the price. Similarly, intermediaries are very important in making their finished products available in the market. There are no issues in case of their flagship stores but when it comes in wider retailing, there comes the question of importers. But mostly A&F Co. operates through their stores. Thus maintaining relations is not a problem along with the brand image that Abercrombie & Fitch makes it to have a smooth business. Customers are the most important in the chain because it is for them that a business runs. Thus, it is very important to connect with their customers. And Abercrombie & Fitch does that perfectly. Its target customers are mainly the college goers and they have a different taste and they cater to it perfectly. Even their promotions are made in such a way, so that it attracts people from a particular age group (Plunkett, 2008). Conclusion Abercrombie & Fitch is one of the leading market players in the apparel industry because of its strategies which has always been a value addition to the company. So to be ahead in this rat race of competition, it will always be required by the company to have certain value additions to the requisite competitive advantage. It is actually not the product that captures the market but the marketing strategy that makes the product look good (Plunkett, 2008). References Abercrombie & Fitch. No Date. Abercrombie & Fitch Brand Protection. Home. [Online] Available at: http://www.abercrombie.com/anf/brandProtection/brandprotection.html [Accessed Aug 22, 2010]. Articlebase. No Date. Situation Analysis Of Abercrombie And Fitch UK. Entreprenuership. [Online] Available at: http://www.articlesbase.com/entrepreneurship-articles/situation-analysis-of-abercrombie-and-fitch-uk-1814074.html [Accessed Aug 22, 2010]. Danca, A. C., No Date SWOT Analysis. University of St. Francis. [Online] Available at: http://www.stfrancis.edu/content/ba/ghkickul/stuwebs/btopics/works/swot.htm [Accessed Aug 22, 2010]. Drummond & Ensor. Strategic Marketing, Planning & Control, 2nd edition, ButterworthHeinemann, 2001. Gereffi, G.& Memodovic, O., 2003. The Global Apparel Value Chain. United Nations Industrial Development Organization. [Online] Available at: http://www.unido.org/fileadmin/media/documents/pdf/Services_Modules/Apparel_Value_Chain.pdf [Accessed Aug 22, 2010]. Porter, M. E. Competitive advantage: creating and sustaining superior performance. Simon & Schuster, 1998. Plunkett, J.W. Plunkett's Retail Industry Almanac 2009 (E-Book):  Retail Industry Market. Plunkett Research Ltd, 2008. Saint Mary’s College. No Date. The History of Abercrombie and Fitch. Home. [Online] Available at: http://www.saintmarys.edu/~berdayes/vincehome/courses/comm303/student%20projects/finchness/history.html [Accessed Aug 22, 2010]. Stapeleton, J.& Thomas, M. J. How to prepare a marketing plan:  a guide to reaching the consumer market. Gower Publishing Ltd, 1998. University of NorthCarolina. No Date. Advertising Tactics and Scandals of Abercrombie & Fitch Co. Section 1. [Online] Available at: http://www.unc.edu/~lventers/Treasure%20Hunt.pdf [Accessed Aug 22, 2010]. Read More