Strategic Management and Marketing for Luxury Goods - Report Example

Strategic Management and Marketing for Luxury Goods Table of Contents Introduction 3 Situational Analysis 3 Target Audience 3 SWOT Analysis of Burberry Group Plc. 3 PEST Analysis of Burberry Group Plc 4 Competitor Analysis of Burberry Group Plc 4 Five Forces Analysis of Burberry Group Plc 5 Marketing Mix Tools of Burberry Group Plc 5 Product Life Cycle of Burberry Group Plc 6 Ansoff Matrix for Burberry Group Plc 6 Marketing Objectives 7 Marketing Strategy 7 Action Programme 9 Control Method 10 Conclusion 10 Reference List 12 Introduction Burberry Group Plc. is an international luxury brand which distributes fashion accessories, sunglasses, outerwear, fragrances and cosmetics. It was founded by Thomas Burberry in the year 1856 (Burberryplc, 2015). Over the years, it has built its status for design, innovation and craftsmanship. Outerwear is regarded as the main product of the company and is best expressed by means of the iconic trench coat (Burberryplc, 2015). The main purpose of the paper is to do the macro environmental analysis of Burberry by focusing on its strengths and weakness. Doing competitor analysis will provide both defensive and offensive strategic context in order to identify the threats and opportunities. The paper will also focus on the five forces analysis of Burberry Group Plc. to analyse the competition level within the industry. Product life cycle and value chain analysis will also be taken into consideration. Based upon these analyses, a marketing objective will be proposed and the marketing strategy will also be suggested that will support the objective. Finally, the paper will develop the action plan which will contribute towards supporting the marketing objective and a control method will be proposed to monitor the action plan. Situational Analysis Target Audience The target segments for Burberry Group Plc. are the youngsters and middle aged women and men from upper class. It targets the premium customers who appreciate timeless, clean and smart British classic style. Brand engagement is driven by inventive use of traditional, social and digital media in order to connect customers internationally with focus on the premium customer (Burberryplc, 2015). SWOT Analysis of Burberry Group Plc. Strengths: Burberry Group Plc. has vast network of wholesale, retail as well as licensing channels internationally. It is one of the most valued companies around the world because of its legacy. The company has good brand presence especially in England. Moreover, they have associations with global celebrities which help them to reach to the preferred customers. Weakness: The brand is very much available in high-street, but has a very low presence in couture. Opportunities: More advertising and marketing would increase the visibility and after association with different brands, they expect to make the fashion reasonably priced. International expansion would assist the brand to expand worldwide. Threats: Burberry Group Plc. faces intimidation from their competitors in terms of its pricing and availability (Duncan, 2002). PEST Analysis of Burberry Group Plc There is a requirement of the market scanning of Burberry Group Plc. in order to make proper strategic responses that can be done through PEST analysis. Political factors: Burberry Group Plc. needs to take into consideration the taxation policy and trade regulations when marketing or sourcing products outside Europe. The company sources more than 55% of their raw material especially from Europe and this makes the company unaffected by the Chinese imports impacts of de-pegging of Yuan/dollar. Economic factors: Most of the countries are affected by the economic recession. The economy has recovered in the year 2010, but then also it has badly affected the employment. Burberry Group Plc. requires scrutinizing the rates of inflation because it may directly have an impact on the customer’s buying capacity. Social factors: Burberry Group Plc. is described by, luxury positioning, britishness, historic icons and genuine outerwear heritage, which makes the brand famous among the customers. Investing in developing countries is one of the plans of the company. Therefore, it needs to discover the social factors of developing markets such as India. This is because, Indians have positive reception towards the British lifestyle and this will bring success to the brand in India. Technological factors: Burberry Group Plc. have launched artofthetrench.com, which is a website of the company that launches trench coat and is drawing the new luxury customer and it may also provide competitive advantage to the company (Capon, 2008). Competitor Analysis of Burberry Group Plc The competitors of Burberry Group Plc. are Armani, Gucci, Polo and Coach (Dobson, Starkey and Richards, 2009). The competitive positioning of Burberry Group Plc. is appropriate over the longer term. The brand like Gucci and Coach lays emphasis more on the accessories and Polo and Armani lays emphasis more on apparel market, but Burberry Group Plc. has gain its success in penetrating the apparel as well as accessory market while staying a luxury goods brand. The company has succeeded in positioning itself between the Polo and Armani brands in terms of apparel and between the Gucci and Coach in terms of accessories. Burberry Group Plc. has also several product lines within its Burberry brand. This permits for high-end products as well as goods which would be reasonable for acquisition by the customers (Dobson, Starkey and Richards, 2009). Five Forces Analysis of Burberry Group Plc Customer’s bargaining power: The retailers of luxury brand differentiate themselves in terms of designs and styles of the product offerings. The premium and loyal customers are not price sensitive; instead they are attracted by the designs and superior quality of the products. So, the customer’s bargaining power is low. Supplier’s bargaining power: It is low to moderate because Burberry Group Plc. source from overseas manufacturers and due to increased competition there are several suppliers who provide their service to the luxury brand retailers (Merrill, 2008). Threat of new entrants: The threat of entry of new participants is high because fashion and luxury industry is considered as ever growing and there is a threat of cheaper and new brands to enter the market. Threat of substitutes: It is moderate because there are various luxury brands in the industry which are well recognised and accepted by the customers. Competitive rivalry: It is considered as moderate because competitors like Gucci and Armani also offers premium brands accompanied with superior quality to the customers (Marcus, 2006). Marketing Mix Tools of Burberry Group Plc Product: The product line of Burberry Group Plc. includes women and men’s bags, accessories, shoes, scarves, beauty products, gifts and perfumes. Price: The Company adopted two types of pricing strategy for its two segments. A higher price is set for the Burberry London and a low price is set for Thomas Burberry (Chevalier and Mazzalovo, 2012). Higher price is set for the premium customers who are more fashion conscious and low price is set to appeal the younger generation who are price conscious. Promotion: Burberry Group Plc. makes use of global celebrities in order to advertise and promote the products. The company also give opportunities to the teenager models to promote the brands of the kids section. With the assistance of super models to promote the brands help to maintain the status and pull more customers. Place: The products are sold through its 440 outlets and also through its website around the world. The brand situates in the mind of people because of offering extraordinary products to them (Chevalier and Mazzalovo, 2012). Product Life Cycle of Burberry Group Plc Generally, the product life cycle of any product is based on the original life cycle as well as made up of four steps i.e. introduction, development, maturity and the decline stage. However, the product life cycle stages of the brand like Burberry are somehow different. Instead of products declining entirely and customers losing interest, Burberry Group Plc. constantly expand their garments in order to keep a tight grip on the customers. Novel lines are constantly added in products i.e. dissimilar ranges for every season appear as well as novel celebrity endorsements every time. The company also have latest celebrity endorsements every time. This is regarded as the development/growth stage of their product life cycle, which helped the brand to maintain its success. There is always demand for this high-end fashion brand because it gives the feeling of superiority and exclusivity and this is the maturity stage of this brand. Customers even struggle to buy older stock which comes in the sale, just to satisfy them that they are using the products of Burberry brand. Even older items are hunted by customers, which confirms that this brand won’t just get rejected or decline like other ordinary products (Pride and Ferrell, 2012). Ansoff Matrix for Burberry Group Plc Market penetration: The Company tries to expand by providing its current offerings in current markets. It can be attained by Burberry Group Plc. in three different ways, by improving their products, getting the customers of competitors and by persuading current customers or attracting novel customers. Market development: It means that the company tries to expand its business by offering its existing products to new customers. For Burberry Group Plc., new markets consist of Middle East, India and China. All the channels of distribution are utilised to optimise the opportunities. The company has opened 20 new stores in the emerging countries. Product development: A company try to offer new services and products to the existing customers in order to attain growth. Burberry Group Plc. focuses on as well as invests in non-apparel under-penetrated categories to leverage its unique positioning, iconic branding, merchandising expertise and design through making investment in supply chain, marketing and product development. This may assist to maintain the consumer awareness, increase profits and to drive growth. For Burberry Group Plc. non-apparel persists to be the main driver of expansion and growth. The brand maintains to grow its outerwear through constant product innovation (Jobber, 2012). Diversification: It is regarded as the risky strategy as the company try to expand its business by offering new products to the new customers. In this strategy, both market and product development is needed. Burberry Group Plc. has a great history in terms of diversification. It has been already observed that the brand has entered the new markets as well as introduced novel products. The company benefits from great level of brand and product diversity. The operations of Burberry Group Plc. are properly balanced between women’s wear, non-apparel, children’s wear and menswear division (Jobber, 2012). Marketing Objectives The most renowned product of Burberry Group Plc. is trench coats but the company provides a vast range of products apart from their signature products. These products are considered as not as expensive as the trench coats (Duncan, 2002). Moreover, the products can be easily affordable by the customers other than those premium customers. So, the main marketing objective which Burberry Group Plc. should take into consideration in order to grow in future would be to widen the base of target audience and promote other products under their brand name. So, the new target segment would be the customers between the age group of 20-45 years and also be from lower upper income to middle income group. The other products which should be promoted other than the trench coats will be fragrances, watches, cosmetics, bags and scarves, with more focus on them. Other objective include identified for operational expertise especially for marketing and product excellence. Marketing Strategy The current strategy of Burberry Group Plc. is marked by strong franchise combined with top market position in the established countries. It also makes use of emerging markets platforms in order to drive volumes and earnings growth. The company also laid emphasis on meeting the changing demands of customers by means of continuous innovation. The new strategy would be to focus more on other products other than trench coat so, they need to expand their stores network, enhance their operational capabilities and expand the channels of wholesale distribution. This will result in the healthy growth in the coming years. The company may use approach of viral marketing which does not include billboards or television advertisements; instead they may promote through the fashion websites or can make print advertisement in fashion magazines. This will help the brand to appear at the fashion weeks and can also host their personal shows in order to showcase the new product lines. As this brand is already exploiting celebrity endorsement to advertise as well as promote their products, so it will help to build reputation and to build status. They can use more celebrity endorsement for their other products. It will make the brand appealing in front of customers (Chevalier and Mazzalovo, 2012). Other marketing strategy would be to make use of mobile application. Various tactics and tools can be utilised in order to promote the marketing strategy. The brand already has an app but do not have any mobile application. This would be the best means to reach the new customers. The mobile application will help to display the entire range of product, which the customers can contrast and compare (Duncan, 2002). They can also look for new store around them and can book the products and buy it afterwards by means of this application. No promotion takes place without the use of social media. Creative content as well as plenty of pictures are needed to be uploaded on Burberry Facebook page to draw more customers and also to make them conscious about the other products. Hashtags is one of the options that can be utilised on Twitter. Apart from this, Twitter’s new feature, which allows the image to be tagged, can also be used. Burberry Group Plc. is regarded as a designer brand. Therefore, to draw more new customers, the company should tweet a random collection of celebrities who are using the products of Burberry. This way they could reach maximum number of customers (Duncan, 2002). To make optimisation of search engine successful, the company can also make use of Google AdWords. New upcoming as well as less used platforms of social media are Instagram and Pinterest. For the brand like Burberry, these platforms of social media are regarded the best platforms, which includes more pictures and fewer words. That’s what Burberry Group Plc. should do in order to retain current customer and draw new customer. Novel pin board is required to be prepared or made in the Pinterest which will list all the products categorically. Due to the great brand image as well as quarter integration of the international organisation, Burberry Group Plc. can enhance the consumer responsiveness in a more efficient manner. So, their strategy should be to increase their franchise which is in the hands of back as well as front house operations. The company should invest more in the marketing and supply chain of product development. They can also utilise the marketing synergy i.e. entire distribution channels should be used towards optimising the opportunities of investing in developing markets (Chevalier and Mazzalovo, 2012). A thriving differentiation strategy will help the Burberry Group Plc. to charge premium price for the products in order to gain the loyalty of customers because customers are strongly attached to the differentiation characteristics of products. The company has both price-based as well as differentiation-based product advantage. They have price-based product advantage because they charge high price by providing value for their product. The diversification in their product category helps them to achieve differentiation-based product advantage and therefore assist in sustaining for a longer period of time (Chevalier and Mazzalovo, 2012). Recently, Burberry Group Plc. has entered into new countries like the USA and also the emerging countries like Middle East, India and China. In all these regions, if the company will try a novel method of making their products suitable or fit to their social and environmental atmosphere, then the strategy will turn into the successful one. Shifting from legacy trench coats towards different designer coat or different unique product will also add to their differentiation strategy. However, the novel designing should require more convenience, less maintenance as well as low costs (Chevalier and Mazzalovo, 2012). Action Programme The action programme which will contribute towards supporting the overall marketing objectives ranges from market research to the launch of new product. The market research about the customer’s preferences will be carried in the first and second month. Then the requirements of customers will be accessed in the second and third month. As there are many competitors of Burberry Group Plc., so it is necessary to access the offering as well as pricing strategy of the competitors and this will be done in the third and fourth month. The assessment of risk will also be done in the same month. Then the marketing objectives will be developed in the fourth and fifth month after the risk assessment. The marketing objectives will be to widen the base of target audience and to promote other products under their brand name. To support the marketing objectives, marketing strategies need to be developed and this will be completed by the end of eighth month. Then the budgets will be set for adding new product lines under the brand. This will be done in the eighth and ninth month. The novel design of products should require less maintenance as well as low costs. Marketing strategy will be implemented in the ninth month and the new product will be added in the existing product line in the tenth month. Control Method A budget is considered as a balance among the cost/price of advertising and generating materials and the profits or revenue generated by marketing plan (Bogsnes, 2008). Various controls are required in order to monitor the budget of marketing, including travel expenses, expenses of print advertising, internal costs and the market research costs for the marketing department of the company. All these expenses are required to be monitored in order to maximize profitability and minimize spending. Expenses which are involved in doing the assessment of competitor’s services and products also required to be under budget. Assessment of customer’s needs involves costs such as the cost of distributing pamphlet, filling up questionnaire by them, etc. Advertising as well as promotion through the fashion websites also involves cost which add to the budgets and this need to be controlled. Conclusion The paper highlights the strengths and opportunities for the Burberry Group Plc. by taking into consideration its weakness and threats from the competitors. The assessment of macro environment is also done to make proper strategic responses for the company. Burberry Group Plc. has gained its success in penetrating the apparel as well as accessory market while staying a luxury goods brand. The product life cycle of this brand shows that they have not experienced the decline stage yet. The customer and supplier’s bargaining power is low, threat of substitutes and competitive rivalry is moderate while the threat of entry of new participants is high. The main marketing objective which Burberry Group Plc. should take into consideration in order to grow in future would be to widen the base of target audience and promote other products under their brand name. The new strategy would be to focus more on other products other than trench coat so, they need to expand their stores network, enhance their operational capabilities and expand the channels of wholesale distribution. Other marketing strategy would be to make use of mobile application. The mobile application will help to display the entire range of product. The diversification in their product category would help them to achieve success. Reference List Burberryplc., 2015. Burberry: Group Overview. [online] Available at: < http://www.burberryplc.com/about_burberry/group-overview> [Accessed 2 May 2015]. Bogsnes, B., 2008. Implementing beyond budgeting: Unlocking the performance potential. New Jersey: John Wiley & Sons. Capon, C., 2008. Understanding Strategic Management. 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