burberry strategic management
TRANSCRIPT
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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