Executive Summary
Burberry is a British fashion house, which offers luxurious pieces and accessories. It distributes everything going from clothing to accessories and even perfume, fragrances and household materials. It is an iconic British product and represents a true image of the British culture abroad. It was widely known by its distinctive tartan pattern, which has been subjected to a lot of copies around the world. The importance of the brand and its strength in the economic world can be figured by the fact that her majesty Queen Elizabeth II and his royal highness, prince of Wales have granted the company Royal Warrants. Burberry is an English company, which has been listed on the London stock exchange as well. Revising some of the elements of the current marketing program that Burberry implements, showcases a few modifications which could help in increasing its market size and in increasing its profitability. Hence analysing the brand’s macro and competitive environments and the marketing programme elements, recommendations of changes to a number of the marketing mix elements taking into consideration prospective consumer groups are to be found in this study.
As mentioned in the company’s history, Burberry “was founded in 1856 when 21 year old Thomas Burberry, a former draper's apprentice, opened his own store in Basingstoke, Hampshire, England and it wasn’t until 1870 that the business had actually established itself by focusing on the development of outdoors attire”. Therefore, it has witnessed a lot of change from then until now within the context in which this company is producing its goods. thus the importance of analyzing Burberry’s marketing scheme resides in the analysis of its macro environment today. Therefore, a few forces should be looked at such as the politics, the economy, the society, the technology, the legislation, and the environment factors of today’s world that affect the productivity of this company. According to John Kay, “The subject of the strategy analyses the firm’s relationship with its environment, and a business-strategy is a scheme for handling these relationships” (Dransfield,2001).
Based on a study that was conducted by the London School of Business and Finance entitled “Strategic Development at Burberry” the PESTLE analysis of Burberry would be quite interesting to look at.As mentioned in the article, anyorganization should beintunewiththe environment thereforethereisaneedofmarketscanningtomakeappropriatestrategicresponses,whichcanbedonebyPestleanalysis”.First of all, politicalfactorsincludegovernmentstability,taxationpolicy,foreigntraderegulationandsocialwelfarepolicies.BurberryneedstoconsiderthetraderegulationsandtaxationpolicywhensourcingormarketingproductstopartsoutsideEurope.As also mentioned in the paper Burberry,sources60%ofitsrawmaterialsfromEurope(Zekaria,2010).As for the economic factor,itcontainsfactorslikeinflation,unemployment,interestratesandmoneysupply.Economicdeceleration,inUK,beganin2008whenGDPcontractedby0.1%andtheeconomycontractedby4.9%by2009becauseoftheslowdownintheglobaleconomy.Thoughtheeconomyrecoveredin2010,thisslowdownhasadverselyaffectedthecreationofjobsinthecountry.Nearly2.5millionwereunemployedin2010(UKCountryprofile,2011).When it comes to Burberry, as a company itneedstomonitortheinflationratesasitmaydirectlyhas an effectonthebuyingcapacity.Forexample,whenrecessionhitUK,stocksstumbledto£1.60,andpressurizedArendt’stocutcostsby£50staffbyabout10percent(Friedman, 2011).Socio-cultural Factorsare factors likepopulationdemographics,incomedistribution,lifestyle,consumerismandsocialmobility.Thebrandisdefinedby itsBritish style,democraticluxurypositioning,authenticoutwearheritageandhistoricicons,whichmakesitsopopularamongthepeople. As mentioned in the introduction Burberry was given the Queen’s, and Prince’s warranty.Investinginunder-penetratedmarketsisoneofthestrategiesofBurberry.So,ithastoexplorethesocio-culturalfactorsoftheemergingmarkets.Technological factors include factors like new discoveries and developments, speed of technology transfer. In fact, Burberry was the first luxury brand to livestream a fashion show in 3D, where consumers could buy products directly from the cat walk. Moreover, it was the first to introducesocial networking sites and websites like art of the trench.com where customers customize their products which is another example of the technologic usage in Burberry. Any organization should consider environmental factors like environmental protection laws, waste disposal and energy consumption. Burberry renewed focus on diverting waste from land fill. Burberry’s recycling partner has converted over 130 tonnes of samples and raw material waste into cardoorinsulation(Burberry.com). Legallawslikecompetitionlaw,employmentlawandproductsafetyshouldbeconsideredbyan organization todeveloporprotectthestrategy.Burberryfacedaproblemofcopycats,which infringed its trademark.Burberryclaimedtospend£2millionayeartofightthesecounterfeits.ItusesanInternet-monitoringservicetohelppickupthediscussionanditalsoworkswithcustomofficialsandlocalpolicetoseizeandsuereplicas(Jobber,2010).
Macro and CompetitiveEnvironment
As widely known, the competitive environment or the market structure is the dynamic system in which a company or brand competes. And within this competitive environment, resides two types of competitors the direct and the indirect ones. The direct competitors are the companies which provide a product similar to the company in question. In Burberry’s case these direct competitors would be Brands that produce fashion and accessories from clothes all the way to perfumes. Indirect competitors are producers of a dissimilar product but one which can be easier to attain and replaces the original. The industry structure is basically the levels or hierarchy and structures in the company. Burberry’s industry structure can be seen as entrepreneurial structure or functional structure;Entrepreneurial structure as the organization is completelymoved by the chief executive Arendt’s, and on the other hand, functional structure is like all the functions such as production, finance, marketing and human resources is controlled by chief executive(Thompson,1997).
Porter’s five forces framework helps in analyzing the competitive conditions of Burberry’s company (Johnson et al, 2006). To begin with the “threat of substitutes” is to be looked at which focuses on the other luxury brands which have established their names in the fashion industry along side of Burberry’s. Moreover, the fashion industry is an ever-growingindustry, which means that the threat of other new entrants is always increasing especially that some of the new entrants may be offering a cheaper brand attracting a large number of a low-income mass of people. Suppliers and relying on them is also an important factor since there is a need to have good relations with the raw material supplier as well as the need to have many suppliers and not just one. Burberry has established a strong pillar when it comes to such a subject. The supplying power is not the only power needed to be strong, and assured; however, there is a need for the power of the buyers to be as strong, and constant as well. The buyer power is affected by the current economical status of a country as well as by the prices of the products. In fact, the inflation or any occurrence of an economic downturn affects the buying power of the customers and it is always found that more customers are becoming price sensitive. Furthermore, there is danger of intense competition from the rivalries such as brands like Gucci, which attempts to gain competition over the others.The following table below showcases a short analysis of the brand’s competitors.
Eventhough at some rates there is similarity between what Burberry is offering to the buyers and what other close competitors are especially concerning the target market and the strengths, there is still quite a difference when it comes to prices and to managing such companies.
Marketing Programme Elements and SWOT Analysis
SWOT analysis
Analysing the internal and external environment of the organisation is very important in order to identify and analyse the factors that influence the performance of the organisation (Stacey, 2007). Williamson, Cooke, Jenkins, & Moreton (2012) have emphasised that analysing and auditing the internal and external environment is one of the most important elements of strategic management. There are numerous tools used by organisations for analysing the external and internal environment and one of the most important tools is SWOT analysis (Hitt, Ireland, & Hoskisson, 2012).
SWOT analysis allows the organisation to analyse the internal as well as external factors influencing the organisation (Pickton, & Wright, 1998). ‘SW’ of SWOT analysis represents the Strengths and Weaknesses of the organisation and these are the internal factors of the organisation that influence the performances. The external factors are analysed through ‘OT’ of SWOT analysis where ‘O’ represents the opportunities that the organisation has and ‘T’ shows the Threats that are being faced by the organisation (Piercy, & Giles, 1989). Therefore SWOT analysis helps the organisation to analyse internal competencies as well as external competencies (George, 2012).
Internal competencies are critical while formulating strategies as the organisation can use its internal resources, skills and competencies to grow as well as in formulating strategies and making important decisions (Freeman, 2010). On the other hand, analysing the external factors is also important for the organisation in formulating strategies and in making important decisions (Hussey, 2012). David (2001) has said that external factors are uncontrollable factors as the management is not able to control these factors. However, these factors influence the organisation and these factors need to be considered while formulating strategies (Hill & Jones, 2007).
The following table will showcase the SWOT analysis of Burberry, which can help identifying such a company as one different from other competitors as well as help in identifying some of the weaknesses, which can be worked upon in order to increase productivity, and sales and set it apart from other companies.
Marketing Mix and the 4P’s
A second section of this study is to assess the current marketing programme elements of Burberry, and thus in order for that to be achieved there is a need to look at the marketing mix of this brand. The marketing mix consists of the 4 P’s of this brand: product, place, price and promotion. For starters, as a product, Burberry covers women’s wear, menswear, cosmetics, children’s swear as well as household goods. It is of a high quality and of exclusive luxury, and as well of a very limited availability. It has a well known logo and its branding is renowned worldwide. Moving on to the place, Burberry’s birthplace is England.However, it has outreached many other areas around the world. Burberry witnesses new store openings in new and emerging markets everywhere around the globe. It has flagship stores and concessions and a short channel structure with full management. Burberry stores can also be reached digitally through Burberry.com and various social media channels and networks such as Facebook, Twitter, and application programs. Price is another factor to be looked at and it is sectored under physiological traits and prestige pricing. At Burberry stores, there is limited discounting and exclusivity with a high GP. Promotion, a last factor in this section of the study, is a rather important point since it evolves around the capacity of this brand to spread its image worldwide. Burberry’s promotion is achieved digitally, again, through its website and through the various social medias it is connected to. Moreover, Burberry is included in a competitive advertising, which allows it as a brand to follow up on other direct competitive brands and make sure it is not falling behind. Burberry also has promotion as advertising in the media such as television, magazines, and fashion editorials. Joint promotions such as the one with Harrods also help in spreading the word about this brand and increase it’s popularity. Finally sponsorships play a significant role in promoting Burberry as a luxury brand, for example the sponsorship it has made for HOYS.
When it comes to withholding a critique over the 4 P’s of Burberry as a brand, it is important to mention (Watershoot, 1999) who highlights a number of problems within the current marketing programme elements. Four of these problems are the most important. To begin with, it is claimed that the company “focuses on what marketers do to customers rather than for them” meaning that the company emphasises the customers wants and not needs. Moreover, it is “externally directed and ignores the internal market” which highlights the fact that Burberry is a globalised brand, and since it has became such a successful international company is now finding it more important to identify with the needs of abroad customers and is no longer directly targeting English markets. Another critique is that it is “taking a mechanistic view about markets” pointing out to the fact that it looks at customers through a mechanistic lens rather than a social or even an economic one. Finally, as Baker mentions, it “assumes a transactional exchange rather than a relationship” meaning that the base of exchange between enterprise and customer is rather deprived from certain humanitarian elements and are rather only transactional and profit related or even targeted (Baker, 2007).
Recommendations
There are many ways in which Burberry could consider changing elements in their marketing mix in order to gain a larger market size and turn into a more profitable Brand.
As a general overview of these recommendations, four major points can be looked upon. First of all is the fact that this company needs to continue to invest more in new and emerging markets in order to insure a reduction in risk. Moreover, it should try its best to increase the awareness there is around the brand and this could be achieved by targetinga fashion conscious,suitable market with the right marketing strategies. However, here lies a very finepoint, which is the importance of not lowering the level of the product rather than targeting the right market. Furthermore, the brand should keep trying to cover all social media channels, especially with an ever increasing social network activities, and even try to link them all together in order for this brand to remain a leader digitally. Finally, it should always keep a seasonal new product development and a product diversification in order to reach new markets and retain customer loyalty.
Based on the study of all the options, directions and methods of strategy development of Burberry, made by the London School of Business and Finance, it is possible to dig a little bit deeper and look at some other more detailed recommendations and even discuss some strategic choice for this brand. In business level, Burberry cannot adopt price-based strategy because of disadvantages like margin reduction and inability to reinvest. Burberry has developed its brand name as a Royal luxury brand, which will be affected if it follows price-based strategy and will lose high-class customers, and the label’s prestige. Burberry can adopt focus differentiation by providing high-perceived goods with superior quality and new creative designs, which justifies the premium price of the products. Market penetration and product development discussed in Ansoff’s matrix comes under this level. Market penetration can be done by increasing the market shares or by developing competitive advantage over the competitors, or by growing the coverage of the market size. This can be done in a structured method of development by increasing the number of retail shops in the existing markets, and enabling an on-line shopping experience to more countries and regions. Product development can be done by appointing new young designers with a modern twist in designing, and by adding value to the new products by famous celebrities and public figures endorsements. Product development can be done by organic method or licensing for new accessories. In corporate level, as we saw before strategic choice is diversification. The two strategic directions: market development and diversification in Ansoff matrix comes under this level. The vertical integration can be done by acquisition of the textileindustriessupplyingrawmaterialsorbyacquisitionofrivalcompanieslikeGucci.Theacquisitionagainshouldbedoneafter analyzing thecriteriaseenbefore.MethodsofJoint venture or alliancecanbeusedforhorizontalintegrationbycontractualrelationshipwithhighendsportscarbrandfortheproductionofitsmerchandises.Forexample,Pumaproducesclothingandothermerchandiselikebags,walletsforFerrariandDucati.
Burberry, a British brand, which makes every fashionable being earned for, actually started in 1856 by producing coats for army officials. Swiftly, in just few years it lost its old cultural status and became the highly renowned brand it is today. What contributedto itspopularityin the US and Asian market as well as other areas around the world, is the impressive strategic brand extension without forgetting its image as an English brand with British features that makes its products very iconic and noticeable.Not to be forgetting the importance of the development of execution strategies, recourses and competencies that this brand has which have clearly set it apart from other direct competitors and gradually lead it to success, and distinction as a high-end label.ThestudiesalsoshowsthestrategyshouldbeadoptedinpropertimesbyalotofanalysislikePESTLEandthesuccesscriterianeedstobe analyzed beforeexecutinganystrategy.“All is well in Burberry”.
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