Abercrombie & Fitch Brand in Europe - Assignment Example

ABERCROMBIE & FITCH BRAND IN EUROPE al Affiliation ABERCROMBIE & FITCH BRAND IN EUROPE Qn What would be the Most Appropriate Marketing Strategy (Segmentation, Targeting and Positioning) for A&F Brand in Europe? Internationalisation of business strategies is a concept that has attracted a lot of attention in the modern business environment. As the domestic markets become highly competitive and saturation result to constrained revenue, organizations are forced to find new market to sustain their survival. Abercrombie & Fitch is a US based company founded in 1892 focussing on fashion clothes and accessories market within US. However, the company has opted to enter in the Europe market to increase its revenue and to survive in the competitive business environment. While the Europe market is a potential market for fashion products, it is evident that competition and changes in consumer tastes may be a challenge for the company. On this ground, A&F needs to identify its target market as it internationalises its business in Europe. Evidently, the European market is high segmented and this contributes to the complexity of entering this market. The consumer tastes are highly dependent on the age of the people and this results to different tastes among the young children, youths and the elderly. When entering a new market, it is crucial for an organization to consider the social factors that drive business in the new market. On this basis, it is crucial for A&F to consider the variation in the customer tastes across age groups while selecting the target market (Hezar, Dalgic, Phelan & Knight, 2006). Since the company has specialized in “preppy” fashions, it would be advisable to target the young generation in the Europe. High institution and college students in Europe are sensitive to fashion when it comes to sports clothes as well as casual wear. However, the youths are the greatest potential customers due to the spending abilities and their fashion consciousness. However, the company positioning strategies will determine the long-term survival of A&F in the European market. Analysis of the external market factors shows that there is intensive competition in the European Fashion market. Ralph Lauren, Calvin Klein and Versace are the major competitors in Europe that have already established themselves in the market. More companies are intending to enter the European fashion market, which implies that competition is bound to increase. From this angle, A&F needs to use the most cost-sensitive model as they anticipate price competition in the market. The company needs to minimise its expenditure to be able to offer the best prices in the market. Secondly, while the company has focused on the indoor experience as the sole marketing approach, it is crucial that the company should focus on outdoor competition to ensure that it can win big in the market (Cavusgil & Cavusgil, 2012). Position the company as a high quality seller of fashion products would attract more customers within the market. In this respect, A&F should bases its marketing approach on strong market research strategies if they have to become a top seller in the new market. Environmental market scanning is an important strategy when a company intend to position itself within a new market. Research helps to understand the dynamics of the market such as consumer preferences that may impact the company’s business approach. While the company enjoys a strong image due to its good reputation in the US, keeping this image is a crucial factor for its long-term success. The company must use a customer-based model to ensure that they can acquire customer input that will help them in designing products that are desirable to the customers (Cavusgil & Cavusgil, 2012). Effective targeting and positioning will help the company to acquire a top position within the European market. Qn 2. Is it Preferable to Standardise of Adapt the Product Policy to the European Market? When entering a new market, a company has to weigh on whether to retain their original product or value of re-inventing the business wheel. Majority of organizations find it easier and cheaper to adopt their original policies in new markets. On the other hand, it is clear that unique market characteristics may render a product policy unreliable in new markets. Whenever, there is change of customer tastes and preferences, there arises a need to redefine product policy to ensure survival in the new market. International business theories have pointed out to the unique nature of different market segments that makes complex to use any particular marketing policy across different business arenas (Tan & Sousa, 2013). Besides, changing marketing trends is another reason why implementing one market policy across all market segments is impossible. A&F has used an experiential marketing policy in the US, a strategy that has consistently attracted customers into its stores. The company’s marketing strategy is concerned with the customer experience within the stores which depends on lighting, product staging, music, fragrance and sales person entertainment. While this approach has worked efficiently in the US, the company should standardize its strategy to suit the Europe market needs which are quite different from those in the US (Schilke, Reimann & Thomas, 2009). While the political factors within the Europe market are friendlier than in US, there is evidence that social factors may render the experiential policy unsuitable. While the US customers are more responsive to the in-store experience, the Europe customers are more sensitive to product quality and uniqueness (Chung & Zhenni, 2006). For instance, one of customers of A&F complains that the company’s products are becoming “common” and thus the customer finds it difficult to purchase such products. On this ground, the company needs to standardize it policy to meet the European market demands. The company needs to focus more on quality and unique products that are appealing to the public. The company needs to learn from the past experience of companies such as Calvin Klein that have experienced pressure in the European market due to the choosy nature of European customers. Calvin Klein business has been unstable until when the company decided to shift its strategy by developing quality products whose demand is greater in this market. Besides, the Euoropean young generation, which is primary target for A&F have dynamic tastes that vary from time to time (Chung & Zhenni, 2006). Therefore, the company needs to focus on changes in fashion trends if they have to succeed in this market. One way that the company should change its products is by changing it strategy from “preppy” to “trendy” to reflect its intention to adopt changes within the fashion market. However, it is advisable that the company retains its customer experience as marketing strategy. Research shows that customers prefer companies that provide unique experiences such that each visit in their stores appears different from the previous. From this perspective standardizing its business policy will contribute immensely in the success of A&F in Europe. First, the company will be able to take advantage of the opportunity of selling trendy fashion clothes in the US. A&F will take advantage of the great demand for fashion products in the European markets (Cavusgil & Cavusgil, 2012). Secondly, the company will be able to win customer loyalty by provide the right customer experience, a strategy that has succeeded well in the US. Resultantly, the company revenue will continue to increase and the company will perform optimally both in the short and long-term. Qn. 3. The Company has opted for A Differentiated Pricing Policy between the USA and the European Markets. What are the principal Risks Associated with this Choice? In the 21st business environment, competition within the market has severely affected prices of products. In Europe, the increase in competitors within the fashion industry has consistently resulted to an increase in consumer bargaining power while considerably reducing the supplier bargaining power. As a result, price competition is inevitable within the UK fashion market, which is one of the challenges that A&F must prepare to address (Jen-Ming & Chun-Yun, 2013). Evidently, the company has refined its pricing policy as one way of ensuring success while entering a price competitive market. While price models have successfully attracted customer in different markets, there is evidence that such as strategy comes about with its own risks. To begin with, price competition is crucial as price forms the main factor that customer consider while choosing their products. Since the company targets the young generation in Europe, it is possible to conclude that price is an important factor for such middle income class population. Therefore, price competition will give the company an upper hand by attracting many youths who cannot afford to purchase expensive luxury products. The customers will choose A&F since it provides quality products at the least prices possible as compared to other fashion stores (Ellickson, Misra & Nair, 2012). Therefore, price modelling is an opportunity for A&F to win high populations and acquire a top position within the market. On the other hand, price competition may pose risk to the survival of the company as it may not necessarily result to increase in customer flow. For instance, the European market has become a battle for fashion industry and the prices of products are consistently going down. Companies such as Ralph Lauren are using pricing strategies to win the market, a strategy that is much similar to one used by A&F. Therefore, there is the risk that a drop in the product prices by other companies will follow immediately after A&F launches this strategy. Therefore, price competition is not a guarantee for increase in the number of customer visiting the European retailer shop (Ellickson, Misra & Nair, 2012). Moreover, A&F is a company that has consistently experienced the challenge of high operation costs. In an effort to improve the in-store customer experience, the company spend heavily on customer service, which increase the salary and wage expenses. Therefore, reducing prices will result to a further decrease in its revenue, while this strategy may not necessarily contribute to an increase in customers. Additionally, changing the price policy in A&F may compromise the brand value, which may impact the customer attitudes. From its invention, the company has positioned itself as “luxury” brand that provides prestige to its customers. Therefore, majority of A&F customers buy due to the unique image that the company offers to its esteemed customers. Therefore, the company risk brand dilution as more customers will perceive is brand as “ordinary” and hence may prefer to find alternative products. Making its fashion products affordable to every customer will discourage buyers who purchase from the company with an aim to retain a prestigious public image (Jen-Ming & Chun-Yun, 2013). Therefore, the company needs to streamline its pricing policy to ensure that it does not suffer brand dilution which may turnoff customer rather than attract them. Qn. 4. Should the A&F brand stick to its exclusive distribution Policy or extend its distribution Channels in European Countries? Overtime, A&F has focussed on exclusive distribution channel design strategy within its target markets. Exclusive distribution is a supply chain management strategy in which there exists intermediaries or few stores through which customers can access the designed products. A&F has opened very few stores in Europe as part of their exclusive distribution strategy. Notably, there are a number of merits that can be assigned to this channel design approach in the European market. Such a channel design model ensures that the product does not become “common” and hence maintains its prestigious value. Only customers who can access the few stores have the access to A&Fs fashion products. Therefore, this strategy ensures that there is high level of customer loyalty and results to better market control (Gudonavičienė & Alijošienė, 2008). Besides, exclusive distribution is a price oriented model that minimises the cost of establishing stores and ensures that few outlets serve the entire population. Besides, there is better management of stores as few stores are easy to manage than when there are many. However, exclusive distribution has a number of disadvantages that may affect A&F business severely. First, exclusive distribution reduces availability of the company products within the market, making it hard for customer to access these products. Therefore, loyal customers have to move a long distance to purchase the A&F fashion products. Accessibility of products is an important factor that a company may consider while pushing their products into an international market (Jen-Ming & Chun-Yun, 2013). From another angle, in a competitive business environment such as Europe, where companies are quality oriented, it is apparent that customers have many options to choose from while making purchasing decisions. Companies such as Ralph Lauren have their products distributed all over the market, which promises a severe competition if accessibility is a factor to consider (Gudonavičienė & Alijošienė, 2008). On this ground, an exclusive distribution strategy is a tow edge knife with both advantages and disadvantages. On the other hand, A&F may consider the option of opening up more stores in Europe to increase customer access to their fashion stores. However, an intensive distribution strategy has its own ugly side especially when considering a fashion company such as A&F. One positive impact of such a strategy is that customers can access products closest to their location, hence increasing the chances of purchase (Jen-Ming & Chun-Yun, 2013). Moreover, this approach targets beyond the royal customers by ensuring that even impulse buyers can buy their products, not by planning, but by finding them closest to their destination. From this perspective, A&F would enjoy a broader customer range by opening more stores in Europe. On the other side, an intensive distribution channel may result to loss of the company’s image (Gudonavičienė & Alijošienė, 2008). Such a channel design would result to reduce the prestigious value of the product and this would result to brand dilution. Their fashion products would become common products and hence customer loyalty would be at stake. From a close analysis of A&F’s brand portfolio, an exclusive distribution strategy is more appropriate. The company’s management has spent many years building the brand image of the company. The company has branded itself as “luxury” product seller, and this is why the company has won loyalty from its customers. Since the company needs to establish this customer loyalty in the international market, maintain an exclusive channel design would be good way to retain its corporate image (Jen-Ming & Chun-Yun, 2013). Secondly, the company needs to maintain high control of its stores to retain its experiential marketing strategy that the European young customers have always desired. Lastly, in anticipation of severe competition in the market, it would inappropriate for the company to increase its store management cost by increasing more store as this would frustrate its price structure policy (Gudonavičienė & Alijošienė, 2008). Therefore, A&F should streamline pay attention to approaches that can increase efficient in its exclusive channel distribution rather than open more stores in Europe. Qn. 5. What Elements must be taken into consideration when developing the communication policy designed for the European? Communication policy refers to all the activities that a company establishes in attempt to create brand awareness within its target market. One of the factors that A&F should consider while developing a communication policy is the characteristic age and their intimate relationship with modern technology. Since A&F is a brand that focuses on young males and females, it should use a different communication strategy to create brand awareness. The youths are more likely to have an online identity and their ways of life bind them together as groups. This customer characteristic would be crucial in marketing the company’s products within the Europe. A strong online strategy should be established to ensure that A&F effectively meets its clients. A part from the use of a customized web platform, it would be crucial to venture in social media services where youths visit frequently. Facebook and Twitter is one of the best ways to meet youths who are the majority in these sites. First, social media is accessed through the internet and since internet is not globally limited, an online strategy would assist to meet more potential customers. Secondly, the social media platforms such as Facebook have been optimized for business marketing. For instance, Facebook allows organizations to set up pages where youths can comment and share for the friend to see. Lastly, the proliferation of the smartphone technology among youths makes the social sites a good place to meet potential customers (Kotler and Keller, 2012). Through a modest marketing approach, the organization can attract more customers for the Rugby brand. In addition, it is crucial to consider the organization’s relationship with its customers. The company should focus on an integrated communication strategy to appeal to the customer loyalty. Integrated communication approach requires conversational leadership where leaders allow all the stakeholders, including the customers and employees, to contribute to the design of organizational strategies. The youths have unique tastes and preferences that pose a great challenge to satisfy. The best way to satisfy them would be to engage them in designing the products in a way that satisfies their tastes. On this ground, it would be crucial to open effective communication channels through which customers can respond to the organizational products. For instance, the organization should allow customers to participate in the design stage before product launch. Working closely with the youths will help A&F to keep up with the fashion trends and to remain competitive within the market (Kotler and Keller, 2012). Since customers are loyal to organizations that satisfy their demand, engaging the youths in product design will foster loyalty. At the same time, it would be crucial remain observant and to take note of the changing tastes to satisfy the demand of the target group. Promotional strategies would go long in facilitating customer satisfaction in the fashion industry (Kramer, 2004). Since the youths are active and energetic, road-show promotions would be one way to reach out to the target customers. For instance, A&F can organize road shows to visit major colleges and to issue some free sample cloths to the public. This will create more awareness and attract the young women and men into the brand. Another way to promote the products is by offering discounts on group purchases. For instance, giving a 5% discount offer on any group of youths who come together to buy the same products. Since youth identify themselves in groups, it would be crucial to appeal to their social structure. In addition, this would increase customer loyalty within the organization. These discounts would provide the youths with the opportunity to benefit from the social structures. For A&F, this would mean more purchase of their goods and higher profits in the long run. These promotion strategies should be rolled out through online media and any other social networks. An effective communication policy would contribute to the long-term success of A&F. Bibliography Cavusgil, S, & Cavusgil, E 2012, Reflections on international marketing: destructive regeneration and multinational firms, Journal Of The Academy Of Marketing Science, 2, p. 202, Business Insights: Essentials, EBSCOhost, viewed 21 February 2015. Chung, H, & Zhenni, W 2006, Analysis of Marketing Standardization Strategies—A "City" Market Framework, Journal Of Global Marketing, 20, 1, pp. 39-59, Business Source Complete, EBSCOhost, viewed 21 February 2015. 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