burberry strategic management

7/27/2019 Burberry Strategic management

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STRATEGICMANAGEMENT

BURBERRY

SUBMITTED BY:

JAYSHREE BEHRAMOHINI GAUTAM

NIKITA KHESKANI

SHAKTI PATEL

MFM-III


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INTRODUCTION

Strategicdevelopmentis concerned with the direction

and scope of an organization over the long term,

which involves: -

the development and deployment of its resources

and competencies, through which it achieves

competitive advantage in a changing environment.


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BURBERRY

The presentation will further talk about U.K based luxury brand

Burberry strategic management. Burberry currently ranks at 51stin

FTSE 100 index with a market capitalization of over 6.5bn (Stocks

Challenge, 2012


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BURBERRY

Establishment

21 year old,Thomas Burberrystarted small shopin England in 1856.

The brand gotinternationalrecognition in 1910

Popularity

Burberry gainedpopularity duringthe First World Warwhen it won the

contract to supplytrench coats to theBritish army

Later it was worn inmovies likeBreakfast atTiffanys andPeter sellers in

Pink Panther

MainAim

Burberrys mainmission was to sellBritishness to theworld

Restructure strategicmanagement

In 1998 profitreduced from 62million to 25million.

The company hadto redesign itsstrategic model toregain its iconicstatus

By the end of year2011, thecompanys profitrose to 295.7million and 1.5bnin revenues


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BURBERRY BUSINESS

Burberry markets its products to its end consumers

through three channels: -Retail, wholesale and

licensing.

Burberry sources and markets its apparel and

accessories worldwide with major markets in Spain,

America and Asia Specific which accounts to 90%

its revenue and emerging markets like China,

India, Russia, East Europe and the Middle East


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PRODUCT LINE OF BURBERRY

1880 Gabardine Macs- A

breathable and waterproof

fabric used for making of

trench coats

1985: -tie locken trench

coat which was worn by

army officials in Boer War

1920: -Burberry check

was registered as a

trademark

1955: -childrens clothes,

personal products,

watches, fragrances,bikinis, shoes and home

wares


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STRATEGIC THEMES OF

BURBERRY

Leveraging the franchise.

intensifying non-apparel development.

Accelerating retail-led growth.

Investing in under-penetrated markets.

Pursuing operational excellence.

Product and excellence underpin this brand

momentum


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Corporatelevel strategy

Concern with overall

organizations. Decisionslike geographical

coverage, mergers andacquisitions, and how

resources are allocated todifferent parts of an

organisation

International expansion tobring success in Burberry.

The results were profits soaringto 162 million by 2005, a sixtimes increase since she took

over

Increase expansion withfranchise partners also.

Business level

strategy

How to compete successfully inparticular markets, which

product in which market, andcompetitive advantage

Burberry focuses more on this

strategy because of one single

line.Ahrendtssdigital strategy

introduced social networking

site .

Thus, Burberry overcome the

recession in 2009

Organisationallevel strategy

This level includes that howdifferent organisation deliver

effective allocation ofresources and people


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PESTLE ANALYSIS OF

BURBERRY

Political

Burberry, sources 60% of itsraw materials from Europe,

which makes the groupstrongly unaffected by

Chinese imports impacts ofYuan/dollar de-pegging

Economic

During 2008 there waseconomic deceleration which

was recovered back bycompany in 2010.Burberry

needs to monitor the inflationrates as it may directly effecton the buying capacity.

Social

Britishness, Democraticluxury positioning, Authenticoutwear heritage and historic

icons, which makes it sopopular among the people

Technological

Burberry was the first luxurybrand to live stream a fashion

show in 3D, socialnetworking sites and

artoftrench,com

LegalBurberry faced a problem ofcopycats, which infringed its

trademark

Environmental

Burberrys recycling partnerhas converted over 130 tonesof samples and raw material

waste into car door insulation


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INDUSTRY & MARKET STRUCTURE OF

BURBERRY

Burberrys industry structureis

:Entrepreneurial structure: -is organisedwholly around the chief executive.

Advantages of these structures are: they are

centralized, relatively less overheads andsimple lines of control.


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America: -constitutes to 27% of the total revenue.

Europe:this includes the operation in Europeexcluding the Spanish operation and accounts for 34%of total revenue

Asia-Pacific:including operations in China andJapanconstituting for 33% of the revenue for Burberry.

Retail:This channel accounted for 64% of its totalrevenue including 174 stores, 199 concessions withdepartmental stores and 44 outlets, as well as digitalcommerce across the world.

Wholesale:29% of revenue for Burberry comes fromthis channel. (including franchise)

Licensing:Remaining 7 % of revenue comes fromlicensing, including royalty income


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Burberrystrategiccapability

The brand is positioned asdemocratic luxury and

britishness appeal to itscustomers

Kate Middleton wore aBurberry trench coat

during her coming outphase of Princess-to-be

Burberry-anintangibleasset

Burberry has a list of richintangible resources fromits 154 years past history.

Burberry was awarded

Royal warrant two times in1955 by Queen Elizabeth

and Prince of Wales in1989. in 2010 awarded for

design and innovation

Burberry-competences

Digital 3d innovation

Social media

Website:-artoftrech.com

advertisements featuringcelebrities such asBeckhams, Elizabeth

Jagger and NicoleAppleton.


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SWOT ANALYSIS

STRENGTH Wide geographical presence (Revenue

Collection)

Diversified network

Strong Branding

Good advertising and brand presence inEurope specially England

One of the biggest fashion houses in UK offeringclothes, perfumes, beauty products etc

Granted Royal Warrants by Queen ElizabethII and the Prince of Wales

Associations with international celebrities toreach out to the customers

WEAKNESSES

Weak eff iciency

Burberrys inventory turnover (2.2) is

low as compared to industry standards

(4.04).

Low resonance in certain

countr ies like Singapore

Due to Burberrys positioning it is verymuch accessible in the high-street, and

has a low couture presence.


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SWOTANALYSIS

OPPORTUNITIES

Growth in Emerging

MarketsAs seen from above, emerging

markets give people new wealth,disposable incomes and fuel thegrowth of luxury goods.

Rise in popularity of e-

tailingBurberry, with its strong brand equityhas established its presence in onlineretail format.

THREATS

Global economic slowdown

Given the financial problems Europe, as

well as the troubled America, globaleconomies have been impacted and

could lead to a slowdown

Changing consumer

preferencesThe brand faces threat from other

competitive everyday brands in terms of

pricing as well as availability

PORTERS FIVE FORCES


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PORTERS FIVE FORCES

ANALYSIS

INDUSTRYRIVALRY

Take overmarket share

for competitor

BUYERBuyer power is not

strong

SUPPLIER

Distributionhub changed

NEW ENTRANTS

Capital investment,economicscale

SUBSTITUTEPRODUCT

Competitorapply


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BARGAINING POWER OF

CUSTOMERS

(LOW)

Burberry check pattern became signature trademark for customers.Burberry

check pattern

Segment to niche market and positioning its brand from young to old (25-60)

The pattern changed the customer base from the soldiers to politicians,celebrities and famous adventurers

Customers

Expansion of brand with licensing and franchising, spreading the brand allover the world.

Thus, brand grew all over the world and customer base was spread all over

Brand was sold and flexible at different locations at different pricesdepending on locations.

Licensing andfranchising


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BARGAINING POWER OF SUPPLIERS

(MODERATE)

For leather, the company joined the BLC leather working group

Understand impact of tanneries and thus the brand invest in environmentalstandards within the leather industry.

LEATHER

Increasing demand of Burberry trench coat results into increase in

suppliers all over the world Burberry only sources fur from places which are very well known for

maintaining high standards of ethical treatment of animals.FUR

Burberry previously used Uzbek Cotton as a raw material which wasimported from Uzbekistan cotton industry

After the news of child labour used by cotton factory they removed it fromsupply chain.

COTTON

There is high bargaining power of suppliers in relation to leather and fur asit is very demanding.

HIGH BARGAININGPOWER


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THREAT OF NEW ENTRANTS

(WEAK)

It is defined as luxury brand and consider as fashionicon status for niche people.

LUXURYBRAND

Customers are loyal to brand as this brand showsbritishness i.e. the customers U.K culture in their

products

DEMOCRATICPOSITIONING

Customers are buying product since their grandancestors so they have trust in the brand.

No threats to brand because their market is niche anddifferent

LOYALCUSTOMERS


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COMPETITOR RIVALRY

(MODERATE)

Polo Ralph Lauren and Coach

Polo is more in apparel and coach into accessories

Price of polo is less than Burberry and also it is not into nichesegment.

Coach holds only 6% of market share in accessories which is lessthan Burberry

LOWCOMPETION

RIVALRY

Armani and Gucci

Armani price is same as Burberry but holds higher position in luxurybrands than Burberry.

While, Gucci has more option and wide variety in accessories withalmost same price of Burberry

HIGHCOMPETION

RIVALRY

Burberry has adopted continuous fashion.

The brand keeps continuous check of Armani and Gucci and try to bein their league.BURBERRYS

VIEW


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THREAT OF SUBSTITUTES

(WEAK)

Niche alternatives to retail of ready-made clothes.

Include buying directly from manufacturers,especially with the growth of online sales.

Homemade andcouture clothing

A significant threat to revenuesCounterfeit

clothing

Individuals live in, coupled with the need forindividual and group identity, makes luxury retailclothing essential to consumers.

Socio-politicalenvironment

Hence,overall threat of substitute is weak.


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CONCLUSION

With a key strategy of brand extension and its very British

image Burberry soon became popular in US and Asian

markets.

Burberrys adoption of related diversification had led to its

success.

The studies also shows the strategy should be adopted inproper times by a lot of analysis and the success criteria needs

to be analyzed before executing any strategy.


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RECOMMENDATIONS

Burberry can adopt focus differentiation by providing high perceived goodswith superior quality and new designs, which justifies the premium price.

Market penetration can be done by increasing the market share or bydeveloping competitive advantage or by growing the total market size.

Product development can be done by appointing new young designers and addingvalue to the new products by famous celebrity endorsements.

The vertical integration can be done by acquisition of the textile industriessupplying raw materials or by acquisition of rival companies like Gucci.

Methods of Joint venture/ Alliance can be used for horizontal integration bycontractual relationship with high end sports car brand for the production of itsmerchandises.


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THANK YOU

burberry strategic management

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