Analysis Of Burberry's Strategic Position Using Various Frameworks (Research Paper Sample)

Title: Burberry Strategic Analysis
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Executive summary
Burberry has experienced tremendous success in the 2012/2013 financial year and has been keenly following its strategic plan to continue growing and performing despite dynamic environmental business conditions and challenges such as economic uncertainty and foreign investment.This report will analyse Burberry’s strategic position using an array of frameworks to stud the macro environment, internal environment in relation to the company’s current resource and competence capability. The PESTEL and Porter’s five forces tools will analyse the company’s external environment while the value chain, SWOT and VRIN analysis will analyse the internal environment. The Ansoff and BCG matrix will identify the ideal strategic direction based on existing and new markets as well as products and the most profitable products that the company should focus on. Lastly, the SAFS framework will be use to critically evaluate the strategy.
The findings indicate that the company has adequate internal resources and a favourable competitive external environment as well as a feasible and suitable strategy that the company should utilize. However, there is need to focus on elements of sustainability as this is a significant global trend that is shaping global markets.
Table of Contents
TOC \o "1-3" \h \z \u Executive summary PAGEREF _Toc383509953 \h 2
1.Introduction PAGEREF _Toc383509954 \h 4
2.Analysis & critical evaluation of Burberry’s strategic position PAGEREF _Toc383509955 \h 6
2.1 External Analysis PAGEREF _Toc383509956 \h 6
2.1.1 PESTLE Analysis PAGEREF _Toc383509957 \h 6
2.1.2 Porter’s Five Forces Analysis PAGEREF _Toc383509958 \h 7
2.1.3 Industry Life Cycle PAGEREF _Toc383509959 \h 8
2.2 Internal Analysis PAGEREF _Toc383509960 \h 9
2.2.2 Porter’s Value Chain Analysis PAGEREF _Toc383509961 \h 10
2.2.3 Strategic Capability PAGEREF _Toc383509962 \h 11
2.2.4 VRIN Analysis PAGEREF _Toc383509963 \h 11
3.Analysis of strategic direction PAGEREF _Toc383509964 \h 12
3.1 Ansoff Matrix PAGEREF _Toc383509965 \h 12
2.2 BCG Framework PAGEREF _Toc383509966 \h 12
4.Critical evaluation of strategy SAFS framework PAGEREF _Toc383509967 \h 13
5. Conclusions PAGEREF _Toc383509968 \h 15
References PAGEREF _Toc383509969 \h 16
1 Introduction
Burberry is one of the top ranked UK luxury brands in Britain and worldwide and has been in the industry since 1856 when Thomas Burberry founded it. Under the Burberry Group plc, the fashion house retails clothing for men and women, cosmetics, accessories and fragrances. Currently, the fashion brand is operational in Europe (42 mainline stores), Asia-Pacific region (58 million stores) and the Americas(78 mainline stores) and 28 other stores in the rest of the world. The store has concession stores also; 58 in Europe, 153 in Asia Pacific, 2 in the Americas and 1 in other parts of the world (Burberry, 2013). The financially stable brand made total revenues of £1,999 million of which £ 1, 417 million (Burberry, 2013) was generated from retail sales depicting an increase from the revenue of the previous financial year as depicted below. Wholesale revenue generated £ 473 million and licensing generated £109 million (Burberry, 2013).
Figure 1: Burberry Revenue
Source: Burberry, 2013
The company is categorized into three categories; London, Brit and Prorsum as shown below in figure 2.
Figure 2: Brand stratification
Currently , the company has three product ranges; accessories, men, women and children with the accessories category attaining the highest percentage of revenue in the previous financial year (£ 734 million) followed by women’s (£618 million), men (£464 million) and children (£73 million) as illustrated in figure 3.
Figure 3: Product Range
Source: Burberry, 2013
The report will analyse the company’s current stratgey using a raneg of abnalytical tools and critically establish Burberry’s current strategic direction as well as recommendeations for the future.
2 Analysis & critical evaluation of Burberry’s strategic position
2.1 External Analysis
Johnson et al. (2010) posit that the macro-environment is the most external business environment layer and influences a firm alongside industry sectors and competitors. The PESTLE analysis framework will analyse Burberry’s macro environment.
2.1.1 PESTLE Analysis
Political/Legal: Owing to the fact that Burberry has operations in China, Middle East and South America, there are potential risks such as volatile political situations, changes in national policy and alteration in legislation in regards to labour laws, licensing, franchising and taxation laws which all affect company operations (Johnson et al., 2010). Since production of Burberry products is done in the UK, policies by the EU including trade and industrial policies will apply to EU member countries (European Commission, 2013) therefore Burberry must comply with EU laws and other political implications.
Technological/Environmental: The use of technology such as virtual designing and e-commerce influences the strategic direction of Burberry as utilizing this aspect strategically is a contributing factor to attaining competitive advantage because it enhances global accessibility and convenience (Porter, 1996). Environmental factors such as sustainability in the industry through eco fashion practices and slow fashion, as well as, recycling are aspects facing the fashion industry (Joy et al., 2012); which directly influences production and retailing practices of the company.
Economic/Social: Factors such as the recent economic crisis and predicted Euro zone crisis are likely to affect the global economy especially in Europe (International Monetary Fund, 2013). Other factors determined by the European Union and UK government such as taxation rates, increased production costs and unemployment rates in the country will affect consumer spending power therefore affecting the company strategy (Kapferer, 2012). Social trends such as enhanced consumer awareness on green practices and green marketing influence Burberry strategic choices. Also, changing demographics and the growth of the middle class has influenced the pricing strategy as evidenced by Burberry’s classification of its products from accessible to limited editions.
2.1.2 Porter’s Five Forces Analysis
The Porter’s five forces framework as proposed by Porter (2009) analyses an industry in relation to the competitors and potential market entrant as well as substitutes. The figure 4 illustrates that for Burberry, there is high competitive rivalry, high threat of new entrants, low bargaining power of buyers and low threat of product substitutes.
Figure 4: Porters Five forces Analysis
2.1.3 Industry Life Cycle
The luxury fashion industry is at the shakeout stage owing to its decades of experience in the industry and continuous growth in sales revenue and continued expansion of the company in various global regions.
2.2 Internal Analysis
2.2.1 SWOT Analysis
SWOT analysis is an analytical tool that is utilized by organizations to identify company strong internal points and external forces directly threatening a firm (Johnson et al., 2010). Based on the external audit carried out, the framework will be based on this. Some of the company’s strengths include the fact that it has strong brand recognition, a flexible supply chain and multiple distribution channels. The high quality products have been enhanced by flawless branding strategies that use iconic figures such as Kate Moss in their campaign (Burberry, 2013). Some of the weaknesses however include intense competition from rivals that dominate more market share in the industry including Chanel and Gucci. Moreover, the products are imitated largely which might dilute brand recognition. There are several threats such as licensing issues in foreign markets such as China and other inconsistencies, the changing global economy and fear of an economic recession that may affect profitability as well as changing consumer preferences. Opportunities include growth of emerging markets, possible diversification into skin care products (The Telegraph, 2013) and organic apparel to cater for the green consumer.
2.2.2 Porter’s Value Chain Analysis
The value chain analysis (Porter, 1996) utilizes a resources framework to identify firm dynamic capabilities which are imperative in identifying competitiveadvantage for a firm.
With physical infrastructure globally and a workforce that id dedicated in producing quality products Burberry utilizes special material form specific suppliers. The company also uses retailing, wholesale and licensing as distribution channels.
2.2.3 Strategic Capability
Barney (2001) posits that using the resource based view; organizations can identify their core competencies and dynamic capabilities which lead to attaining competitive advantage. The resources and capabilities are achieved from human resources as well as unique capabilities that cannot be imitated. Some of the strategic resources: flagship centres, ware shops, Burberry (Brit,London,and Prorsum). The company competencies: competent workforce, unique designers, and strong leadership which enhances competition at an advantage.
2.2.4 VRIN Analysis
This tool is used to assess the rarity, value, imitability and how non-substitutable a product is alongside its implications.
3 An...