Burberry Market Success Challenges - Coursework Example

Burberry

Introduction

In business, having a brand matters. A brand is a unique label which identifies a product manufactured by a specific company. All successful businesses worldwide have brands. From tech manufacturing giants like Apple, Sony, and Samsung, to car manufacturing giants such as Mercedes and Ferrari. The clothing line industry has not been left behind as companies such as Prada, Gucci and even Burberry compete to dominate the market. Burberry is a British luxury fashion company founded in 1856 in Hampshire by Thomas Burberry (Jarosinski 1). The company has grown leaps and bounds since the 1800s following the invention of a tear-proof fabric which put it on the world map. Burberry has clothed some high-profile individuals over the years and was even commissioned by the British government War office to design uniforms for British officers. This paper seeks to discuss the reasons which made Burberry successful, the challenges and the marketing changes it can take to solidify its market position.

Burberry’s Image

Burberry is perceived as a fashion luxury giant in the market. Over the years it has managed to gain public fame through its unique designs and endorsements from celebrities. Burberry continued to gain worldwide fame and reputation through its entry into the world of sports. For instance, Roald Amundsen, the Norwegian explorer, and his team wore Burberry attire when they discovered South Pole during one of their excursions. The company made huge strides when they started manufacturing trench coats which were embraced by famous renowned celebrities. The company’s image has continued to soar over the years specifically after the company designed its logo which helps customers differentiate their products from the rest. The Equestrian Knight trademark was launched in 1909 and their unique Burberry check trademark added to their trench coats in 1920 (Jarosinski 2). With all this success, however, Burberry started performing poorly in the markets. The company underwent several ownership changes and with it came different managers with different managerial styles. This changed the company’s present image when compared to the past and the company started to diversify its products due to the changing cultural demand in the market. Compared with previous generations, people were now enjoying more material comforts. The company thus had to include personal luxury items in its brand such as accessories, watches, cosmetics and leather goods.

Following a poor performance in the market, Burberry decided to make changes to get back on track. Rose Bravo was therefore brought in as the new CEO to try to revive the brand's image. Her leadership was beneficial to the company as she managed to increase the company's sales from £250 million to over £675 million in seven years (Jarosinski 2). One of the critical decisions Ms. Bravo made, which contributed to the company’s success was introducing a fashion runway line and expanding into the perfume business. Secondly, she started an advertising campaign which featured Kate Moss, a British model, in a bikini apparel revealing the iconic camel, red, black and white check that had been synonymous with Burberry since the 1920s (Stoll 88). This move proved to be effective since in less than no time the average customer age of Burberry products dropped by about 30 years. The traditional Burberry check was not used effectively to distinguish their brand from their competitors and therefore this strategy made them independent from other fashion trends while contributing to its revenue success. By shaping the environment, in this case, the customers’ taste, the company became distinct and therefore less vulnerable to being left behind hence turning it into a pacesetter rather than a trend follower (Stoll 88).

Despite all these changes, problems still existed which stagnated the company’s sales. For instance, Burberry had lost its class and unique status by 2006 and many of the people who were now wearing it were football hooligans and drug addicts. Furthermore, the famous Burberry check had been licensed so indiscriminately that it started appearing on baby carriages and diapers (Frank). To realize brand success, the new CEO, Angela Ahrendts, bought back the licenses, closed some of the company’s branches in some parts of the world and fired some design teams. In addition, Ahrendts centralized the company’s original manufacturing Yorkshire mills and put trusted experts in charge of decisions globally. Moreover, there was the need to rediscover the company’s roots and thus a cultural anthropologist was brought to study the brand’s history and tell its story (Frank). At the same time, Burberry has incorporated technology and social media to make sales and increase profitability. Through sites like YouTube and Instagram, the company tells its story to its potential customers since most people want to know the whys and the whats behind a popular brand. “Burberry World” platform was a brainchild of embracing technology and this has made revenue to double over the past five years to £2.3 billion, pre-tax profits growing even faster to £460 million (Frank).

Challenges

As the company’s CEO the biggest challenge will be maintaining the company's brand. The brand is what customers look for first when they purchase a product. Celebrities and other rich individuals will never be seen wearing attire from a brand that is not established. The biggest challenge, therefore, will be ensuring that Burberry retains its elite status and attractiveness to its target customers. Secondly, regaining focus will be another key challenge. When Ahrendts took over the company in 2006, she discovered that Burberry had lost its focus. She even questioned where were the trenchcoats that proved to be Burberry’s iconic products. The company’s external focus on leather goods and luxury clothing made it neglect its core iconic outerwear, and this gave other brands a chance to get into Burberry’s sanctum (Frank). It is true that organizations which lack a clear focus, concentrate on competition rather than nurturing their own areas of strength. In addition to this, as the new CEO of the company, the challenge would be standing my own personal vision. As the new leader, one can face hostilities from many different quarters – both external and internal, which can be challenging. Some people are resistant to change and this may hinder the implementation of new changes. Remaining true to personal values and vision may, therefore, prove to be a difficult task, and it will be crucial to aligning the company's goals with the leadership team. At times, some new CEOs may try to appease the board of directors and other shareholders. The vision the board has may be different and thus challenging to introduce a new concept which may be new to them.

To overcome these challenges, it will be crucial to focus on which customer segments to target. The luxury industry comprises three customer segments namely, absolute, aspirational and accessible (Jarosinski 3). The purchasing power of the first customer segment is enormous compared to the other two despite being the smallest segment. Focusing on this group can be advantageous since their spending is not determined by economic changes as they are ultra-high-net-worth individuals. The absolute segment comprises of celebrities and businessmen with high spending power and disposable income. As the new CEO, I would personally choose to focus on this group. This is because they appreciate brand history and heritage. They prefer iconic brands which emphasize their elitism. Moreover, their definition of luxury encompasses the brand's emotional environment (Jarosinski 4). Goods which emit quality and beauty appeals most to them and this is one of the focus of the company. Thus, much focus will be on this group of customers as they hold a larger market share than the first group, and ready to spend as much as them. The last segment of customers, accessible, comprises the middle class and upper class. In order to reach this group, much effort will be needed to re-create the brand yet their spending will be largely affected by the prevailing economic conditions, thus imprudent to focus more on them.

It is equally important to focus on the current industry trends as the new CEO. Being conscious and aware of the market one is operating in, is crucial to achieving success. For example, there has been a growing trend of online shopping in the recent years. Thus, the online luxury goods market witnessed an exponential growth and any brand desiring to remain competitive and relevant had to recognize this trend. Thus, as the new CEO of Burberry, I would focus on current trends to ensure the company is not left behind.

Outsourcing Effects

As the world becomes globalized, more companies opted to adopt outsourcing and offshore policy in their manufacturing. However, outsourcing production has a serious negative impact as it leads to the brand losing its originality. Outsourcing also limits the company’s control over its product-licensing agreements. This happened to Burberry when a licensing agreement in the 1960s and 1970s with manufacturers in Japan led to more damaging problems for Burberry products in the Asian market. Burberry licenses provided discounted products from Asian markets to European markets, where higher priced Burberry products were being sold (Pamela and Hsieh). This led to poor sales as there was a shift in demand for the Asian Burberry wear.

Outsourcing production still has negative impacts as it will lead to counterfeit products. How the customers view the brand will change within the luxury market due to numerous suppliers of the same product. For example, in the 1980s the adoption of the Burberry check pattern by football fans contributed immensely to the loss of the brand’s prestige and threatened the brand’s market position (Pamela and Hsieh). Outsourcing will, therefore, distort the uniqueness of the brand as well as the quality perception and customer trust. The "made in Britain" brand appeal is critical to keep the luxury status of Burberry products. This is because it is a marker for superior quality, authenticity, and indicates to the customers the tradition in luxury fashion which is key in justifying premium pricing (Pamela and Hsieh).

Operational and Marketing Changes

To ensure profitability, Burberry can make several operational and marketing changes. The first major change should be restoring to rebuild manufacturing back home. Bringing back manufacturing operational activities back home enables the brand to rediscover its quality and lost glory. Lead apparel firms have been considering offshoring to reach global markets but this brings about operational challenges and an increase in the cost of global supply chain management. Reconfiguring both operational and marketing strategies brings production in close proximity to the original design structure enhancing the firm's competitiveness.

Additionally, Burberry can embrace the new forms of technology to market their products. Technological changes in the marketing world would go a long way in ensuring brand awareness. The use of platforms such as Instagram, YouTube and Twitter can prove beneficial in the marketing strategies of the company. This is because globally, over 4 billion people are connected to the internet. Information can be shared online by a click of a button and therefore easy to reach millions of people. Customers now are more likely to buy what they have seen and heard as opposed to a few years back.

Actions have consequences and it is true that the company's future actions can impact its position in the market. First, the company will have to decide which product lines are appropriate going forward. Currently, the company has products split among four product lines namely Prorsum, womenswear, menswear and accessories (Jarosinski 7). Deciding to continue with all product lines will ensure that Burberry has a hold on all these potential markets and letting go of one line will result in loss of market share dominance. By the same token, Burberry has a multi-channel distribution strategy consisting of wholesale, retail and licensing. Choosing on the appropriate distribution technique will determine how well the company performs. Licensing, for instance, contributed 70 percent of the company's revenue in Japan and therefore, it is crucial to decide which strategy to use. Open retail stores, on the other hand, made up the largest distribution channel over 2005/2006 making Burberry's name prevalent (Jarosinski 8).

Conclusion

Running a successful business is not always easy and requires great effort, planning, determination, and skill. Burberry is an iconic international brand which despite its rich history and status, went through turbulent times. The brand is perceived to be a luxury one with famous people adorning it, yet challenges such as licensing almost brought the company to its knees. Burberry at one point tried to outsource its product which led to the loss of its value and had serious negative impacts. However, the company can embrace new forms of technology to market their product and improve its customer reach as well as maintain its attractiveness to the public.