Ex3 2015F Assignment2 Franca Lehfeldt [a] Burberry

8/18/2019 Ex3 2015F Assignment2 Franca Lehfeldt [a] Burberry

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Case Analysis Report

Assignment 2

Franca Lehfeldt

AD 655

Jung Wan Lee, PH. D.

Administrative Science Department

Boston University


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INTRODUCTION

“Where is our white space? What do we have that they do not?” – these questions

were the first thoughts of Angela Ahrendts, when she took over the CEO position of the

international luxury brand Burberry in 2006 (Amed, 2013). The task to identify the brand’s

fundamental culture, know as its DNA, was the first emerging question to answer, before

setting up strategies, aims and objectives for the international fashion company, operating

worldwide within a permanently rushing business environment, which is following trends

almost before they arise. This case analysis report aims to introduce Burberry as a global

operating luxury fashion brand, facing contemporary obstacles in order to stay competitive

within the international market, while focusing on maintaining competitive advantages and

increasing profit. In order to generate a clear overview and structure the report will firstly

introduce the company as well as its mission statement, its core business operations, its

prototype of customers and their value expectations and finally def ine Burberry’s value

proposition towards its consumers. Applying a SWOT analysis in order to examine the

international business environment of Burberry pursues to present positive and if existing,

negative aspects for going global. Based on these findings, strategic management problems

facing Burberry in a path of going global will be described, followed by the exemplification

of competitive advantages that may occur simultaneously. Finally, the role of going global in

resolving potential issues, as identified earlier, will be discussed.


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COMPANY OVERVIEW

What is the business?

Burberry was founded in 1856 by Thomas Burberry in a small town called

Basingstoke in England, its products back in time, were British men’s outwear. The reputation

of the small and local business grew, when Burberry succeeded with the development of the

fabric called “gabardine”, a material that was resistant to tearing, was weatherproof but was

also breathable (Moore & Birtwistle, 2004). During the First World War, the company was

mandated to develop and produce the officer’s raincoats and designing them with functional

dimensions. The traditional and famous “Trench coat” was born, as a result of the British

military associations. The company became well known for its military production and after a

short period of time, its outwear was adopted by explorers, such as Captain Scott and Sir

Earnest Shackelton, who wore Burberry gabardine cloth on their expeditions (Moore &

Birtwistle, 2004). At the same time, the fashion label developed a retail and wholesale

business, the first store was established in 1891 in central London. Only a few years later the

first Burberry store was launched in 1910 on the Boulevard Malesherbes in Paris. Thomas

Burberry concentrated on indirect foreign market participation and started to supply retail

stockists in New York City, Buenos Aires and Montevideo (Moore & Birtwistle, 2004). After

successful operations over many years within the international market, Burberry was facing

alarming obstacles in 1997, the problem was typified by the fact that at this time the brand

was available in more than 60 stores in London but was not presented by the most powerful

retailers in the city, such as Selfridges, Harrods or Harvey Nichols (Moore & Birtwistle,

2004). The company that originally sold British outwears and especially the outdoor trench

coat produced a multifaceted range of women and men fashion but did not survive within the

highly competitive market of premium and luxury designer brands. However, it took until

2002, when Angela Ahrendts took over the position of the CEO and understood, that “the


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company is British, everything we do has got to be quintessentially British, and that will be a

huge differentiator, and the outwear – it’s what we are, it is our DNA (Ahrendts, 2002). From

2002 onwards, Burberry focused on a multi-level brand strategy based on six key brand levels

for women and men, containing clothes, shoes, handbags, accessories and beauty products.

All products are marketed and sold under the brand name and successfully provide the

company with maximum market coverage and a broad customer appeal. From 2002 onwards

the company became famous for its unique and revolutionary digital marketing and e-

commerce approach and created new standards within the international market, as it will be

explained later on. Figure 1 shows the Burberry product / brand model (Moore & Birtwistle,

2004).

Who is the customer?

Before answering this question from a current point of view, it should be pointed out

that Burberry, due to its previously told tradition, benefits from a broad customer base of

Western Europeans who have known the company for years and committed a very honest

loyalty towards the brand. Furthermore, as the company was established in Great Britain and

mainly grew up in Central London a specif ic customer group called “the European tourists”


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still presents a significant percentage of shoppers for Burberry. This group consists of

European tourists who regularly visit London and associate the city with the style, tradition

and attitude of Burberry products. These customers can be clustered as wealthy, well-

educated, middle aged and traditional Europeans, who do not represent the future business to

the company but a current core asset. Focusing on the future customers, Burberry redefined

and relaunched its brand in 2002 the management chose the target wisely, it would have been

one option to choose the middle-aged man who is likely to own an old trench coat as target

customer (Davis, 2014). If they would have decided to do so, it is very likely that 2% annual

growth would have continued to be the expected norm (Davis, 2014). However, Burberry

changed its target group and announced that they would create a brand, product and shopping

experience, targeting the Millennials. Ahrendts encouraged this decision with the words, most

of us are very digital in our daily lives now, Burberry is a young team, and this is instinctive

to us; to the younger generation who are coming into adulthood now, this is all they know

(Ahrendts, 2002). Furthermore, Millennials are characterized to be incredibly brand loyal,

with a raising attractive level of spendable income. As the company’s financial reviews

indicated this target group pays dividends to Burberry since 2002 until today and is most

likely to do this for years to come (Davis, 2014). Further to the generation classification,

Burberry responded to those who are driving the growth of the global luxury industry, young

Chinese shoppers (McKinsey, 2011). These days 45% of China’s high-end customers are

younger than 35, while in Western Europe only 28%, it will not take long until China will

present the world-wide most powerful luxury market (McKinsey, 2011). Burberry sees China

and the Millennials as the quint essential market for its products and plans to expand its

current 57 retail stores in mainland China by further 43 stores, offering the same shopping

experience online and offline (Phan, Thomas, & Heine, 2011).

What does the customer value?


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Customers of Burberry value a global reputation for excellence of luxury and high

quality fashion products. These aspects are based on a clearly defined company culture, of

delivering traditional British fashion combined with the latest trends of the industry, on a very

high service standard. The company’s customers expect and value the profess ional high-class

service delivered by in-store employees as well as online. The brand represents a certain

statement of social status and belonging, wearing Burberry broadcasts the identity of a

wealthy and privileged lifestyle. Burberry’s tradition and its international superior image, lead

to the customer value of extraordinary products and services.

What is the company’s value preposition?

Burberry has constructed certain aspects that need to be fulfilled in order to present its

entire value preposition towards its stakeholders. The company focuses on the consistency of

its positioning as an international luxury brand, by providing superior online and offline

customer service and shopping experience. The employees are professionally trained within

the company’s talent academy. All areas of the business define and set achievable goals and

standards in order to motivate the working environment. Every Burberry store provides the

identical corporate identity standards and respects the company culture in order to guarantee

the same shopping experience at any location to every customer. Burberry is the leading

fashion label regarding the e-commerce business and promises to provide exactly the same

online as offline shopping experience in terms of design and convenience. The company

believes in corporate social responsibility and invests in educational as well as environmental

organizations in order to contribute to a better future. At the same time all raw materials used

for the production of its products respond to a high level of production standards and are

regularly tested in order to deliver a superior, luxurious and unique product. Burberry’s

overall goal is to exceed the expectations of its customers and respond to their needs and

wishes (Burberry, 2015).


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What is the company’s mission statement?

Burberry is a luxury brand, which is recognized internationally with a worldwide

distribution network. The mission of the company is to maintain its integrity and vitality of

their brand, at the same time, continue to develop the business, which remains relevant to ever

evolving markets and consumer tastes (UK Essays, 2013). The mission statement firstly

emphasizes the status of the brand as it is right at the beginning defined as luxury brand,

which is recognized with a certain image and status within the international market, given that

the overall goal is to maintain this strong position. Research on Burberry shows the

importance of integrity and vitality, as the former CEO Angela Ahrendts underlined many

times in her speeches represents a core mission and the key to successful business operations.

As the brand redefined itself in 2002, by setting the digital advertisement and e-commerce

benchmark for the entire fashion industry and further, its mission statement includes the

relevance of development, growth and correspondence to the market and customer needs.

Burberry clearly knows its core competencies and current advance in terms of digital skills

and focuses on combining tradition and history with a modern approach to conquer future

markets.

INTERNATIONAL BUSINESS ENVIRONMENTS OF THE COMPANY

In order to provide a more presided investigation of the global internal and external business

environment of Burberry, a SWOT analysis will be applied. The model allows identifying the

strengths and weaknesses (internal approach) as well as the opportunities and threats (external

approach) of the company in order to determine its strategic management factors and

competitive advantages for going global.


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Strengths

Brand Equity: The brand equity of Burberry, which consists of the monetary value of

the brand, its awareness, attributes and associations as well as its perceived quality and loyalty

is enormously strong. This is further presented through its latest financial reviews, as the

brand continuously increased its profits and left strong competitors behind with its numbers.

The company is defined as “mega brand”, which is worldwide known and physically

presented through 530 own stores within the international market.

Tradition, history and image: As earlier explained the brand is quintessentially

British and this factor offers a major differentiator towards its competitors as well as its

company DNA of coming from the outwear fashion that leaded to the core product of the firm

the legendary “Trench coat”. However, the image transfer works out perfectly well for

Burberry, supported by the official announcement and firms promise that every single Trench

coat that is sold by Burberry is still today truly made in Great Britain.


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Strong employee commitment: The company did not always perform as successful

as it does since the year of 2002 when Angela Ahrendts took over the position of the CEO.

Nonetheless, Burberry provides a very small turnover rate in terms of its employees, which

clearly states the commitment and loyalty of the team towards the brand during successful and

less successful periods of time. The commitment and passion of its employees represents a

core strength of Burberry.

Loyal customer base: The customer segment of middle-agers as well as the

previously describe European tourists, are significant and highly loyal shoppers and supported

the brand through the last years. However, due to the successful digital marketing approach,

which focuses on the Millennials Burberry can provide a target group, which happens to be

incredibly loyal with an appealing level of income (Davis, 2014). Both customer segments

have a strong value for Burberry and save its dividends in the future.

Strong distribution channels: Burberry currently runs 530 stores worldwide and is

entering emerging markets with growth perspectives, such as Asia, Latin America and India.

Additionally, it is known as role model of digital marketing and sales based on its e-

commerce approach. It decreased its cooperation with retailers and brought back as many

licenses as possible but remained strong in important flag shop retailers such as Selfridges

(London, UK).

Product customization: As part of its perfectly applied e-commerce strategy,

Burberry was one of the first brands to offer customized luxury products to its customers.

Shopper can choose the color, print and personal initials on their scarf, handbag or jacked, this

offer turned out to be exactly what customers were looking for and gathered a competitive

advantage.

Strong social media base: As social media tools such as Facebook, Instagram and

Twitter are parts of the digital marketing campaign, Burberry managed to gain a significant

number of digital fans and followers. Only Facebook shows more than seven million


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followers of the company worldwide, who are interested and amazed by the latest fashion

news. Within todays international competition such a strong follower community presents an

asset to any company.

Network of retail and licensing: Referring to its long business operation history the

company owns and provides all necessary licenses regarding its productions and sales. After

cancelling many retail partnerships the firm still cooperates with the strongest and high

fashion offering retailers worldwide.

Brand association with international celebrities: Burberry was one of the very first

fashion companies that applied celebrity endorsement for its international marketing

campaigns. By choosing British celebrities, such as the actress Emma Watson, the firm

managed to stay authentic, following its own core believes and DNA.

Weaknesses

Limitation of customer base: Despite to the high-growth emerging markets, the

average income of the world’s population is way beyond the possibility to afford any kind of

product produced by Burberry. Very often the monthly rent or total income is less than the

price of a trench coat or handbag. Therefore, the luxury fashion industry is defiantly facing a

limitation of potential customers.

Retailer contracts from the past: In 2002 the company’s major goal aimed to cancel

and buy back retailer rights in order to gain a higher status regarding exclusivity and

availability. However, they managed to sign new contracts with essential and luxury retailers

but they still try to reduce and limited past contracts that can damage the brands image.

No haute couture line: Burberry offers six mono-brands within its entire portfolio,

however even its most exclusive line, called “Burberry Prorsum”, is not a haute couture line

as the other high fashion and strong integrated brands, such as Chanel or Hermes, present.


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Production capabilities: As the international demand continuously increases the

production needs to be adjusted in order to meet delivery dates and consumer requests.

However, taking the first fashion line designed for children into consideration, Burberry did

not manage to respond to the raising demand. It took more than one month for the company to

extend its production and deliver the online purchases form its international customers. This is

a failure in terms of professional luxury service and can damage a company’s image and

brand value.

Creative staging on fashion shows: Observing Burberry’s fashion shows, it appears

that the presentation is very similar to its digital one. Music, models, colors and stage design

look similar to the online and offline shopping experience. However, competitors such as

Chanel leaded by its creative director and designer Karl Lagerfeld redefines itself almost after

every single fashion show. This issue can lead to a disadvantage towards its competitors and

public relation feedback.

Opportunities

High-growth emerging markets: Burberry is facing the age of globalization and

realized already that the most potential and future markets are located outside Europe and the

US. However, following the statistics and numbers, the future markets are Asia, Latin

America and India these markets offer great business opportunities in the future.

Millennial customers: As explained earlier, the millennial consumer segment is a

very profitable target group in terms of its spending behavior and income, especially from the

markets mentioned above. Addressing these consumers with the modern digital marketing

approach and offering them their needs and wishes can lead to future business and profits.

Going mobile: After the revolution of digital marketing as benchmarked by Burberry

itself, it is time to take digital marketing and e-commerce from the desktop approach to the

mobile approach. Consumers tend to use their smartphones more often than their laptops or


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tablets. Therefore the company needs to keep innovating its own created trend and apply its

digital performance to a mobile friendly usage.

Limitation of fashion show tickets: Tickets to a fashion show are always on high

demand and Burberry already decided to limited its physical tickets and direct the show to a

broader online community. Still, the exclusivity is a key to create further demand and can be

applied for future fashion shows.

Luxury-obsessed shoppers in emerging markets: Luxury goods are interpreted as

sign of wealth and social status this is even more the case in emerging market nations. People

identify each other by a certain look and add the feeling of social belonging to it. This offers

the opportunity of strong future sales.

Global expansion: Burberry announced to open further 30 stores outside China’s

metropolitan cities and announced the expansion towards China mainland. This is only one

example and indicates the potential of the move to expand global.

Customization towards uniqueness and customer individualization: Finally a

major opportunity these days is the respondents to the social trend of customization. The

modern consumer requests its own personalized product, matching his own taste, wishes and

character. Burberry began to meet this trend at its very beginning and should continue to

expand it even more. Not only initials on a scarf but entire product designs can be based on

individual orders.

Threats

Digital Marketing is no longer a niche: When Burberry began to apply digital

marketing as its core marketing strategy and tool they redefined the range and outcome of

marketing within the fashion industry and were announced as role model by the Silicon

Valley. These days, it is not longer a niche, the entire world uses this approach and Burberry

has to come up with new trends and strategies in order to keep its position.


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Product production management: As underlined earlier, the company faces

problems regarding its product production when the demand increases unexpected. Therefore

delays of product delivery and availability can end in a damage towards the company’s

professional and luxury image.

Suck in the middle: The brand of Burberry is for sure a high fashion and luxury one,

however, as the company is not as exclusive as labels such as Chanel or Hermes but not as

common as Tommy Hilfiger or Polo Ralph Lauren, it faces the risk to stuck in the middle.

Consumers might have issues to clearly categorize the brand, especially in emerging markets

where people are especially into the high-end fashion.

STRATEGIC MANAGEMENT FACTORS

Given the findings of the SWOT analysis, the next evaluation leads to the description of

strategic management factors that Burberry faces on its path to going international. One can

say that the major obstacles are represented by the acknowledged weaknesses (internal) and

threats (external) but might be prevented or warded using the firm’s strengths (internal) and

opportunities (external).

First of all the leadership team will have to deal with the challenge, which is at the

same time an opportunity, of the high-growth emerging markets, such as Asia, India and Latin

America and the resulting increasing demand. As pointed out in the SWOT analysis Burberry

already faced production and delivery difficulties and will need to find an answer for a stabile

and retrievable product delivery. One option would be to invest in further manufacturing

facilities in order to respond to future international business opportunities or to limit the e-

commerce store to a realistic inventory in stock and deny pre-orders and purchases.

Furthermore a major challenge is to keep up the company’s revolutionary image of

being the first mover of the digital marketing approach, as spotted previously, digital


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marketing is no longer a niche, as it is utilized and expected by international companies and

customers. Burberry is often named, as role model and the legend created by Angel Ahrendts

will last for a while, however the fashion industry is a very competitive and so to say

aggressive market where clients and rivals easily forget about yesterday’s market leaders. The

most likely answer to this problem might be found within the opportunity section, investing in

mobile marketing would be a strategy to gain further competitive advantage.

This aspect, automatically leads to the next problem which the company might face

during its international expansion, that is the new and relatively unknown customer culture of

the targeted millennial consumers. This target audience is diffidently requesting a smartphone

optimized shopping experience, where the investment in mobile marketing would pay off

immediately, however, apart from their basic behaviors and spending habits, Burberry does

not know much about its future dividend payers. Data is handled, as key elements when it

comes to customer relationship management, however, there is no historical data available in

order to gain knowledge that could lead to international competitive advantages. Therefore

providing a perfectly mobile optimized shopping experience would lead on one hand to a

satisfied customer base and on the other hand offer the opportunity to collect essential

consumer data that can be transferred to updated customer relationship management,

matching the needs and demands of the millennial target group.

Finally the management has to decide where exactly it wants the brand to be

positioned within the international market of fashion labels. On one hand there is the high-end

fashion sector, which is presented by international strong brands such as Chanel, Gucci and

Hermes and on the other hand there are well-established international fashion labels such as

Ralph Lauren, Tommy Hilfiger and Tory Burch, which are definitely not competing with the

high-end fashion brands. Burberry is currently positioned in a gap between these two markets,

as its prices are less expensive compared to the high-end fashion market but more expensive

as the commercial brands. However, this gap can be turned into an international business


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opportunity and market niche, but at the same time the targeted millennial customers are so

called luxury brand obsessed and might therefore concentrate on the high-end designers. A

clear position towards one market field would therefore be recommended.

COMPETITIVE ADVANTAGES AND GOING GLOBAL

Concentrating in this section on the competitive advantages Burberry can archive from an

international expansion, the findings of the SWOT analysis are again essential elements to

start with. As presented in the strengths section (internal) the company provides a strong

value by its own brand equity, running 530 own stores worldwide takes Burberry up to the

Olympus of fashion “mega- brands”. Therefore, one can say that keeping this position and

rather expand it globally leads to a major competitive advantage. New entry brands have to

face certain obstacles in order to reach only half of Burberry’s status, while others struggle to

keep it up in a successful way.

The history of the legendary trench coat is automatically associated with the name

Burberry and therefore creates a competitive advantage in this fashion sector that can be

expanded throughout all international markets. It is very unlikely that a customer would

purchase a trench coat from Gucci or Ralph Lauren if the consumer can afford one made in

Britain from Burberry. Having such a unique and strong product Burberry can easily develop

further lines of the traditional trench coat and position itself strongly within the global market.

Following the advantage of the traditional trench coat, the existence of an international

loyal customer base should be underlined. Given the fact that this group does not represent the

future target group of the company, this group of Western Europeans and so-called European

tourists, have been a very loyal and profitable customer base. Even if the future business is

identified in Asia, Latin America and India, currently this loyal audience supports

international sales and is therefore a strong competitive advantage within the global market.


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Burberry adopted or even invented one significant trend within the global society these

day, called product customization. As the company offers its customers to print initials on

their purchases or even choose their favorite color for any kind of product offered within the

portfolio, a global trend was exposed. These days, people worldwide believe in their personal

uniqueness and the desire to express themselves, with fur or without, vegan production

materials or own creations produced and available by Burberry is a massive competitive

advantage and allows the company to set benchmarks towards its global competitors.

As mentioned earlier, Burberry is the most innovative company in terms of digital

marketing and e-commerce strategies however, the company provides at the same time the

intangible asset of an enormous social media and network base. More than seven million fans

are following the Facebook activities of Burberry on their own desire and are happy to be part

of the community. This online community cannot be measured, but within the last years it

turned out that social media communities have a high influence on trends, peoples buying

behavior and commitment. Viral marketing and the social media base are core competencies

of Burberry and a strong international competitive advantage.

Lastly, it should be underlined that the company provides a strong and consistent

network of licensing and can therefore expand internationally way easier than start-ups or

smaller competitors. As the international market is already accessed this factor supports an

even further global approach by playing this advantage.

CONCLUSION

Finally, this case report supports and proves the international success of Burberry as one of

the worldwide leading fashion empires. The firm’s move to go global reveals not only the

identified business opportunities, but offers the company to expand its marketplace and

allows customers all around the world to fall in love with their fashion designs. The


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Moore, C. M., & Birtwistle, G. (2004). The Burberry business model: creating an

international luxury fashion brand. International Journal of Retail & Distribution

Management , 32 (8), 412-422.

Phan, M., Thomas, R., & Heine, K. (2011). Social Media and Luxury Brand Mangement:

The Case of Burberry . Journal of Global Fashion Marketing , 213-222.

UK Essays. (2013). UK Essays. Retrieved November 02, 2015, from UK Essays:

http://www.ukessays.com/essays/marketing/burberry-is-a-luxury-fashion-

house-from-britain-marketing-essay.php?cref=1

Werdihier, J. (2009). The New York Times . Retrieved November 02, 2015, from The New

Yorl Times: http://www.nytimes.com/2009/11/10/business/global/10burberry


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Ex3 2015F Assignment2 Franca Lehfeldt [a] Burberry