L Brands Inc.: The Strategy
Introduction
L Brands Inc. evolved from a simple department store in early 1900s into one of the largest retailers of women’s fashion and apparel products today. It has acquired Victoria’s Secret and PINK, and has made other significant acquisitions. L Brands has branches for Victoria’s Secret products in more than 1,100 stores in North America, Canada and United Kingdom (Nasdaq, 2016). The company markets its products through retail stores located in malls, through international franchise and websites (United States Securities and Exchange Commission, 2016).
Strength
L Brand sells through shopping malls and online. Branded products include personal care, soap, sanitizer and perfumes. Bath & Body Works products are sold through the stores. The company has acquired various trade names for women’s apparel, that can be considered luxury, and it is popular among millions of consumers (NYSE, 2016).
Victoria’s Secret is an important acquisition that has strengthened the company’s brand when it comes to women’s apparel, including fashion-inspired collections and personal and beauty products. Bath & Body Works acquisition is another significant milestone that reinforced the company’s signature personal care and fragrance products.
Other brands include La Senza and Henri Bendel, which enhance L Brand’s beauty products and women’s apparel and help in attaining competitive advantage. The brands have their presence in Canada and stores in different countries throughout the world.
Weakness
L Brands has divested some of its holdings in its third-party business. Because of its multiple products, some are not selling and made no appeal to the consuming public. This requires divestiture to reduce the company’s businesses which have become a burden. This could threaten the company’s growth.
Additionally, it has helped in humanitarian efforts by raising funds, reaching $33 million for Pelotonia, an organization aimed for cancer research (Lbrands, 2016).
Opportunity
L Brands’s strategy to sell its products online is a great opportunity to meet the challenges brought about by globalization. Online selling can greatly improve product sales. Product presentation through websites, or online, is important to customers, especially women, because they can evaluate product information and decide to purchase instantly (Kim, 2007).
Threats
Entrants in the industry are large and competitive retailers, coming from within the United States, including those from Europe, China and other emerging markets. Globalization and internationalization have driven global firms to venture in consumer-intensive products, including women and children’s apparel, beauty and personal care brands.
BCG Matrix
The BCG matrix refers to the firm’s strategic planning activities, which views the firm as a collection of businesses that provide growth and strength for the company. The businesses are independent from each other and have each own direction that can be analysed separately. BCG has a growth share matrix, where businesses (or products) are strategized in four quadrants. The quadrants are assigned for the different businesses of L Brands Inc.
Figure 1. BCG Matrix for L Brand businesses
The classification of businesses into four categories listed above is useful for predicting and examining investment features and cash flows (Morrison & Wensley, 2001) for L Brands’ businesses. This is so, considering that L Brands has several businesses, that while most are cash generating, there are some that need to be re-defined, studied, or processed divestiture.
The current situation in the company
L Brands’s businesses involve products associated with women and beauty. Acquisitions and franchises add value and profit. Victoria’s Secret and Bath & Body Works are key value-inspired businesses that provide growth. But in the midst of this growth, it continues to meet many challenges in a highly competitive sector, women’s apparel and beauty products and accessories. Entrants come and go, and this is because firms take this sector as lucrative and enticing; no wonder, it involves women and beauty.
Competitors range from small companies to large retailers, which have stalls and stores in malls and department stores. L Brands has ventured in online sales, which has been successful, so far, and helps in generating revenue for the company and adding value to their products.
L Brands’s category has been transformed into “e-tailers,” which sell apparel products through websites, or the internet (Khakimdjanova & Park, 2005 as cited in Kim, 2007). Online marketing of apparel products is unique, and different from shopping in stores or stall in malls. In internet shopping, the website has to provide explicit product information for fulfilling consumer shopping motivation that can lead to buying decision. Product description must be good enough. Specific web site characteristics were determined predictors of consumer satisfaction due to “convenience, site design, financial security, and product information” (Szymanski & Hise, 2000 as cited in Kim, 2007, p. 30).
L Brands’s website can be considered unique and state-of-the-art; it should be because, as mentioned in its report to the Securities and Exchange Commission (United States Securities and Exchange Commission, 2016), it has generated sales and added profit for the company. It uses text and icon links that can lead to production description and other navigational features.
The website is itself inexorably entertaining, but informative and interactive. Simple website apps that provide interactivity can affect sales because of its “positive effects on consumer responses” (Klien, 2003; Schlosser, 2003 as cited in Kim, 2007, p. 31). Because apparel sales are increasing through information technology (IT), L Brands management should take more understanding of image interactivity technology (IIT) (Kim et al. as cited in Kim, 2007), the application it is using.
Recommendations on growth strategy
L Brands can adopt a higher level of IIT, for example a 3D virtual model, to develop virtual product presentation and enhance customer perceptions and develop decision making in favor of the company. This can also improve enjoyment from and participation in the online shopping process, leading to a positive response for the company website. This whole activity provides a unique strategy for L Brands that can help in eliminating negative challenges brought about by the fourth quadrant in figure 1, the dogs which produced low product sales and slow growth.
The company has also to divest from businesses that have become a liability. This is comprised of products that are difficult to sell even in online marketing, and have cost much for the company. L Brands’s e-businesses have to develop positive techniques to produce a virtual place where its customers can easily scrutinize the women’s apparel, making it appear they are inside a physical store. Buying through online stores can have positive effects for consumers (Kim, 2007). Interactive presentation in the company’s website can improve L Brands’s presentation about its products and affect customer decision to purchase their products.
References
Kim, M. (2007). Consumer perceptions of apparel products in Internet shopping (Doctoral thesis, Oregon State University). Retrieved from http://ezproxy.sothebysinstitute.com:2195/pqdtft/docview/304833714/fulltextPDF/27B4AB455D58466EPQ/1?accountid=13958
Lbrands: Pelotonia. (2016). Retrieved from https://www.lb.com/
Morrison, A., & Wensley, R. (2001). Boxing up or boxed in?: A short history of the Boston Consulting Group/growth matrix. Journal of Marketing Management, 7(1), 105-129. Retrieved from http://web.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=55125459-a16e-46e7-b760-d068c0f24b39%40sessionmgr4007&vid=0&hid=4207
Nasdaq: Company description. (2016). Retrieved from http://www.nasdaq.com/symbol/lb
United States Securities and Exchange Commission: Form 10K. (2016). Retrieved from http://secfilings.nasdaq.com/edgar_conv_html%2f2016%2f03%2f18%2f0000701985-16-000051.html#LB130201610K_HTM_SA78EC6DE3CB3966B2DB20DB8E0CE9654
NYSE: L Brands Inc LB. (2016). Retrieved from https://www.nyse.com/quote/XNYS:LB/company
